Manufacturers in budget ‘wait and see’ mode, says NW advisor

The latest manufacturing sector data suggests businesses are holding on to see what’s announced in next month’s budget before making long-term investment decisions.

That’s the view of Ginni Cooper, partner at accountancy and advisory firm MHA, who specialises is advising businesses in the manufacturing and engineering sector.

Ginni was commenting after the UK Manufacturing Purchasing Managers’ Index (PMI) fell back further in September to 46.2 (down from 47.0 in August), highlighting the significant challenges that the sector is facing.

According to the latest PMI data, compiled by S&P Global, four of the five PMI components (output, new orders, employment and stocks of purchases) were at levels consistent with a worsening of operating conditions.

Ginni said: “This will come as little surprise to most in the industry as manufacturers are holding their breath awaiting the outcome of November’s Budget. They are desperately seeking some certainty to give them the confidence to invest.

“The sector has recently been hit by a series of setbacks. Increased employment costs have already forced many businesses to reduce headcount, while lingering tariff uncertainty is clouding future planning.

“Most recently, the cyberattack on Jaguar Land Rover sent shockwaves across the entire ecosystem. Although government intervention helped stem the crisis, the incident created an immediate cash flow emergency for many small and medium-sized enterprises.

“Cyber security was flagged as one of the top three challenges facing manufacturers in our latest manufacturing survey and this latest event highlights a critical structural weakness that a shock to one major player is enough to cripple the wider supply chain.

“Manufacturers have exhausted their pricing power. They were able to successfully offset years of escalating costs, from Covid-related expenses to fuel inflation driven by the war in Ukraine, by raising prices. However, that strategy is no longer sustainable. Customers are now highly price sensitive and simply buying less.”

Looking ahead to the autumn budget, which takes place on November 26, Ginni added: “To revive the sector, the industry needs the Chancellor to back the growth agenda by injecting significant funding into the Industrial Strategy.

"However, the most effective tool to restore investment and confidence quickly is to be bold and cut Corporation Tax. If you provide businesses with confidence, they will generate profits.”