‘Budget alone cannot account for manufacturing index drop’
4 Dec 2024
Chancellor Rachel Reeves’ recent Budget has contributed to a fall in the regular CIPS UK Manufacturing Purchasing Managers’ Index for November, suggests a leading industry commentator.
However, says Mike Thornton, national head of manufacturing at RSMUK, the decrease in the index published by S&P Global, from 49.9 to a nine month low of 48, cannot be attributed to Government action alone.
He cited industrial performance over the recent months preceding the Budget, that appeared to demonstrate a general downwards trend in 2024.
“November continues the downward trend of the previous month, reinforcing that it’s not just about the budget,” he said.
“The backlogs of work and new orders indices fell for the third consecutive month, reflective of continued market demand uncertainty. The output index also fell below 50 for the first time since April, another indication that confidence is lower than earlier in the year.”
But he acknowledged that following the recent fiscal announcement, concern had grown regarding rising costs. Of particular worry was the extra cost of employers’ National Insurance contributions (NICs), with a four point drop in the employment index pointing to firms pausing recruitment in order to gauge the effects of the change.
Furthermore, determining whether to absorb or pass on increased costs would be likely to be impacted unfavourably by weaker trading conditions, warned Thornton.
Despite limited positive news, namely a likely improvement in output and a small rise in new export orders, indicating some signs of recovery, UK industry remains vulnerable to wider geopolitical tensions.
While budgetary developments together with the threat of US trade tariff rises after Donald Trump’s return to office in January might increase concerns, increased reshoring could mitigate risk. There was hope also that the publication of the Industrial Strategy in Spring would help provide long-term stability to underpin investment, concluded Thornton.
NEWS: Logistics expert Descartes Systems Group’s 2024 Supply Chain Intelligence Report: Escalating Challenges for Global Supply Chain Leaders survey, has revealed that across all sizes of company, nearly one in two (48%) respondents placed rising tariffs and trade barriers as their main worries. These factors were followed in order of precedence by supply chain disruptions (45%) and geopolitical instability (41%).
