The manufacturing industry has warned the government to prioritise growth in the Budget as the sector fights back from a year-long downturn in the face of “existential threats.”
Manufacturers have faced mounting pressures over the last 12 months as business costs soared in the aftermath of Labour’s first Budget before tariff uncertainty and persistently high energy costs sucked confidence from the sector.
The latest Purchasing Manager’s Index (PMI) from S&P Global showed the industry has bounced to a 13-month high – with a reading of 49.7 – powered by Jaguar Land Rover’s return to form after a cyber attack crippled production across its sties and wider supply chain.
But the state of factory output across the country remained below the all-important 50.0 threshold which would denote growth in the sector.
Experts warned the recovery could remain “short-lived” if the government piles further pressures on firms at the Autumn Budget.
The sector’s industry body Make UK said companies fear further burdens and costs from changes to inheritance tax hitting family firms along with the implications of the looming Employment Rights Bill.
Stephen Phipson, chief executive of Make UK, said businesses were battling a “potent combination of weak demand at home and abroad, as well as escalating costs across the board”.
Make UK has now called for a commitment from the government of no further national insurance hikes and a targeted exemption from business rates for investments in green technologies.
Manufacturing firms face ‘existential threat’
The manufacturing PMI figures – released yesterday – showed employment shrank for the twelfth consecutive month in October, with labour costs cited as the primary factor.
Rob Dobson, director at S&P Global Market Intelligence, said: “There are also concerns the forthcoming Budget will exacerbate the lingering challenges created by last year’s Budget, especially in relation to the impact of national minimum wage and employer NIC on costs, demand and production.”
Phipson urged: “If we are to get growth off the floor, then it is going to be business that provides it and this Budget simply has to have growth as the number one focus.”
He added: “The government needs to stop sitting on its hands on the energy support scheme and continually kicking the can down the road hoping the problem will resolve itself.
Make UK said there remained an “existential threat” to the survival of many companies due to the rising price of industrial electricity prices.