Photographer: Chris Ratcliffe/Bloomberg

U.K. Manufacturing Stays Subdued as Brexit Referendum Looms

U.K. manufacturing unexpectedly returned to growth in May, though the pace was subdued and suggests the sector continues to drag on the economy, according to Markit.

A Purchasing Managers Index rose to 50.1 from 49.4 in April, inching above the key 50 level that divides expansion from contraction. Economists had forecast a reading of 49.6, according to a Bloomberg survey.

The drop below 50 the previous month marked the first contraction in three years. It heightened concerns about the economy’s momentum after expansion cooled in the first quarter.

While the May figure marked an improvement, it adds to a lacklustre economic situation as Britain counts the days to the vote on European Union membership on June 23. While the Bank of England has said uncertainty is having a negative impact on investment and hiring, two officials indicated last month that the slowdown may not be purely referendum-related.

Markit said exports fell for a fifth month, with exchange-rate difficulties and the EU vote among the factors cited.

“There are also signs that increased client uncertainty resulting from slower growth and the forthcoming EU referendum are weighing on investment spending and business decision making,” said Rob Dobson, an economist at Markit in London.

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