By james art S&P Global’s closely watched UK manufacturing PMI came in at 49.9 for October, down from 51.5 the previous month.
Any reading above 50 means the sector is growing, while a score below that means it is contracting.
The latest reading was lower than expected, with analysts’ consensus forecast of 50.3 for the month.
The survey found that some firms had held back on investment amid a “wait-and-see approach” ahead of the government’s budget announcement on October 30.
New orders fell for the first time since April due to a “lack of market confidence” as some domestic customers sought more clarity on how fiscal policies could affect their operations or spending plans.
Demand was weaker from both domestic and external customers, with export orders falling for the 33rd consecutive month.
Rob Dobson, director of S&P Global Market Intelligence, said: “UK manufacturing started the final quarter of the year on a shaky footing amid speculation about the government’s policies ahead of the Budget, which is reported to have led to a wait-and-see approach to investment and expenses.
“These domestic headwinds, combined with a continued loss of export business, led to the first full contraction in new job hiring since April.
“As a result, production growth was close to a standstill.
“The generally unfavorable environment was also reflected in the core PMI, which fell below its neutral mark of 50.0, with business optimism hovering only slightly above the nine-month low since September.”
The survey found that manufacturing employment rose for the third time in four months, and companies said they hired more workers to help clear the backlog.
Christine Hart, legal director in the manufacturing and supply team at Brabners, said: “It is unfortunate to see a slowdown in the strong growth of the manufacturing sector over the past five months.
“This contraction reflects broader uncertainty that has swelled in the run-up to the Autumn Budget and was compounded by a weaker month for export-heavy sectors such as new car manufacturing.”