Growth in UK manufacturing export orders weakened to a three year low in Q1 2019, according to the latest Lloyds Bank International Trade Index, compiled in partnership with IHS Markit.

In the first three months of 2019, the Index posted a reading of 50.4 for new manufacturing exports, down from 50.8 in Q4 2018. A reading of above 50 indicates growth, while one below 50 signifies contraction.

Despite the drop, the number of UK manufacturers exporting reached a record high, in Q1 2019, of 81.3 per cent of firms participating in IHS Markit’s Purchasing Managers (PMI) Survey.

Meanwhile, new overseas services sales dropped at the sharpest rate since the index began in 2014. The index posted a reading of 46.8 for services exports, a fall of two points since the final quarter of last year.

Consumer goods bright spot amid weakest rise in manufacturing exports since 2016

Despite Q1 2019 seeing UK manufacturers continuing the longest period of sustained new export order growth since 2008, it was the weakest rate of growth since Q2 2016.

The weak rate of UK growth coincided with a drop worldwide, with data showing the largest downturn in international trade volumes for more than six years during Q1 2019. Asia and Europe posted particularly sharp declines in manufacturing export sales.

Consumer goods was the best performing export category for UK manufacturers in the first three months of 2019, posting a reading of 54.4.

Textiles and clothing was the strongest performing consumer goods sub-category, posting 63.1, its highest reading since 1997 and significantly up from 55.4 in Q4 2018.

But the strong outing for consumer goods was offset by a drop in new export orders for intermediary goods (semi-finished goods used to produce other products), which posted a reading of 47.1.

US demand for tech offers respite amid decrease in service export sales

UK service exports fell two points in Q1 2019 to 46.8. This is the second consecutive quarter of contraction of exports for the UK services sector and follows a four-year run of growth.

Driven by demand from the US and Ireland, technology services exports bucked the trend rebounding to 51.0 from 45.7 in Q4 2018. Accounting for this, firms cited that Sterling’s relative weakness had positively affected their competitiveness.

Global slowdown in economic growth reduces opportunities for UK exporters

Amid the global economic slowdown, growth in international demand for British goods and services slowed in Q1 2019, from 53.1 in Q4 2018 to 52.5.

During the first quarter of 2019, economic growth was seen in key UK export markets, with the UAE posting its highest reading since the end of 2017 (61.7). The US posted a reading of 54.8 (vs. 54.6 in Q4 2018), thanks to an uptick in services sector activity.

This positivity was offset by weaker economic growth in other export markets. Namely, subdued growth in China continued in Q1 2019 (51.5 in Q1 the same as in Q4 2018), largely thanks the manufacturing sector output plateauing.

Closer to home, there was growth in Spain and Italy in Q1 2019, while demand conditions in France, the Netherlands, Ireland and Germany weakened thanks to a downturn in manufacturing outputs. Conditions in Germany have spread to Poland and the Czech Republic, where sharp contractions in manufacturing growth were measured.

Pressure on UK freight capacity increases amid historic stockpiling

The UK manufacturing PMI index for stocks of purchases increased by over 11 points from the end of 2018 to 66.2 in March reaching a 27 year high.

Further research from Lloyds Bank analysing just over 100 of the UK’s largest publicly traded companies showed a nine per cent rise in the levels of stock held, worth over £5 billion.