Manufacturing sector on solid footing despite Budget ‘wait and see’ approach, says MHA

Manufacturers are awaiting the government’s budget at the end of this month before making firm decisions on spending and investment plans, according to a regional manufacturing expert.

Ginni Cooper, partner in the manufacturing team at Lancashire-based accountancy and business advisory firm MHA, made the comments as the latest S&P Global Purchasing Managers Index (PMI) data for September was revealed.

The PMI, released on October 1, posted 51.5, slightly down from August’s 26-month high of 52.5 but above the neutral 50.0 mark for the fifth successive month.

UK manufacturers saw a further increase in production volumes at the end of the third quarter with output and new orders continuing to rise. However, there was a dip in future expectations to a nine-month low, potentially as manufacturers take a wait and see approach to this month’s autumn budget.

Ginni Cooper said: “Today’s manufacturing PMI data shows a slight decrease in activity, which was expected by the market and reflects what we are hearing on the ground from our clients. Substantial challenges still remain for the sector as we head into the autumn, but the sector is now on a more solid footing.

“While interest rates are on a downward trajectory, the cut is unlikely to have had a major impact on the sector just yet. Rates are high in comparison to many other major markets and there is uncertainty around when the next cut may happen, impeding manufacturers desire to spend or invest.

“The government’s recent announcement on the increase in public sector wages will also be playing on the minds of private sector employers. If there is yet another hike in the minimum wage in this month’s budget, questions will be asked how and will they be able to pass the costs on.”

Ginni added: “On the other hand, the announcement of a new industrial strategy is certainly welcome news for the sector; however, as always, the devil will be in the detail and the strategy needs to be actioned and pushed forward. The issues of skills, supply chain challenges and R&D also need to be addressed.

“The reforms announced to the apprenticeship systems will certainly help to alleviate some of the skills challenges the sector is facing. However, we will have to wait and see if this is going to achieve the desired results.

“Now is not the time for short-term incentives but long-term planning that encourages the manufacturing sector and incentivises investment from abroad.”