The collapse of MG Rover has been accompanied by a more severe slowdown than hitherto supposed across the whole of British manufacturing.
The pace of decline last month as recorded by the Chartered Institute of Purchasing and Supply and NTC Research was sharper than at any time for more than two years, driven by a falling off in new orders. The CIPS/NTC purchasing managers' index tumbled from a revised 49.1 in April to 47.3 in May on a scale where 50 represents no change and anything less a decline.
The survey also showed manufacturers are again cutting prices after a spell when many had reported some success in passing on to their customers sharply rising costs of fuel and raw materials. Manufacturing output declined for the first time in two years, with CIPS' sub-index for production falling abruptly to
47.9 in May, from 50.7 in April, which was still indicating a small improvement.
Exports fell for a fifth month running, with the index for exports at 47.5, reflecting worsening economic conditions in Britain's main markets.
Factory gate prices declined for the first time in 20 months with the subindex for output prices reaching 48.7 in May after
51.6 in April. The number of manufacturing jobs continued to fall, but at a slightly slower pace than in April.
"The sharp fall in the PMI is extremely disappointing and suggests that manufacturing is going through extreme difficulties at the moment," Philip Shaw, chief economist at Investec said.
Vicky Redwood at Capital Economics said some of the weakness could be down to the closure of MG Rover, as this was the first full month since production stopped. But she added: "As this survey has been on a downward trend since the summer, it is more likely to be the result of weakening activity, both at home and overseas."
She continued to believe the Monetary Policy Committee would vote for a cut in rates before long.
Alan Castle, UK economist at Lehman Brothers, said: "The drop in factory output prices will make it much harder for the hawks in the MPC to argue for a rate rise and for the doves to countenance a cut." The PMI for the euro zone indicated a slower rate of manufacturing decline than Britain's.
"The UK is now contracting faster than the euro zone," said Mr Williamson. "The euro area is UK manufacturing's biggest export market and as that moves further towards recession it's clearly going to have a big impact on UK manufacturers."
The European Central Bank is widely expected to leave rates at 2.00 per cent today.