The latest UK manufacturing performance data highlights how conditions in the sector are still challenging and that more targeted support is needed for manufacturers.
That’s according to one the region’s leading advisors to manufacturing and engineering firms commenting after the publication of S&P Global’s UK Manufacturing Purchasing Managers’ Index (PMI) data.
The index was revised lower to 47 in January 2024, slightly up on December’s figure of 46.20, but down from the preliminary estimate of 47.3. Output and new orders continued to decline during this period, resulting in more job cuts and reduced purchasing and stock holdings, according to the data.
Manufacturers also faced challenges in their supply chains due to the Red Sea crisis, which forced input deliveries to be redirected from the Suez Canal. Despite these difficulties, UK manufacturers remained optimistic, with business sentiment reaching a four-month peak.
Ginni Cooper, partner and head of the manufacturing sector team at MHA Moore and Smalley, said: “This month’s Manufacturing PMI is flat, which highlights how conditions are still challenging for the sector.
“The recent announcement from Tata Steel about the closure of the last two blast furnaces at the Port Talbot site will mean that the UK is the only nation in the G20 that isn’t able to produce its own steel. This does not send a positive message to the rest of the sector.
“The manufacturing industry is in the midst of a perfect storm. There are signs that there will be an impact on supply chains due to the events in the Red Sea and potentially also the new border controls on imports from the EU that were implemented yesterday, which will lead to further disruptions.
“These challenges are compounded by the uncertainty of when interest rates might fall, leading to further cost pressures. Manufacturers are going to be starting to feel the impact of corporation tax that came into force last April, as well as the increase in the minimum wage, which will have a knock-on effect and tax repercussions.”
Ginni said the upcoming spring budget was an ideal opportunity for the government to announce targeted support for the manufacturing sector.
She added: “With the budget a matter of weeks away, UK manufacturing is keen for the government to seize the opportunity to make a decisive impact with targeted measures, tax breaks and grants to help stimulate growth and put the brakes on further decline.
“Full expensing, announced in last year’s Autumn Statement, while helpful, was a drop in the ocean compared to what manufacturers were looking for and hasn’t given them the confidence to invest.
“With an election also on the horizon, the sector needs strong leadership and a renewed, comprehensive Industrial Strategy focused on getting to grips with the challenges the sector is facing, whichever party is in power.”