Manufacturing in the UK saw a slight downturn in October, with the latest CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropping to 49.9 from 51.5. This figure, falling below 50 for the first time in six months, suggests a subtle decline overall. However, closer inspection reveals more substantial decreases in specific areas. The backlogs of work, new orders, and future output indices all declined sharply to 43.1, 48.9, and 68.9, hinting at a lack of business confidence likely influenced by uncertainty around the Budget.
Despite these figures, recent government moves aim to revive the sector’s confidence. Both the Industrial Strategy green paper and the latest Budget announcements offer positive steps for manufacturing, with a strong emphasis on investment as a pathway to growth and improving the UK’s productivity. The sector has hovered near or above a PMI score of 50 in recent months, showing resilience. The Budget, if effective, could be the turning point that drives a recovery as the year concludes.
The RSM UK Manufacturing Investment Monitor survey, conducted with Make UK, highlighted manufacturers’ wish list, including a reduction in corporate tax and expanded capital allowances. Although the former was not feasible under current financial constraints, the Budget did uphold commitments to capital allowances and the research and development tax regime, key factors for stimulating sector growth. The Industrial Strategy green paper, while still light on specifics for advanced manufacturing, showed promising investment, allocating £1 billion to aerospace and £2 billion to the automotive industry.
RSM UK economist Tom Pugh noted that the PMI dip is likely due to Budget-related uncertainties, with expectations that it could pick up again before year-end. Current PMI indicators, particularly in output, new orders, and future projections, reflect a broader economic slowdown, in line with other recent business and consumer confidence surveys. Nonetheless, there are some encouraging trends: the employment index rose to 51.4, suggesting sustained hiring confidence. Additionally, the input prices balance fell significantly from 57.7 to 49.5, potentially due to stabilised energy prices despite ongoing geopolitical risks.
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