Although the incremental rise in today’s manufacturing PMI data is, in theory, good news, more than anything, it is a further reflection of the continuing difficulties faced by the sector. PMI still remains below the 50 threshold, indicating a lack of confidence and optimism towards the future.
Manufacturers are being hit with a double whammy. Customers are facing increased costs therefore ordering less and firms are now starting to feel the full impact of the rise in minimum wage and employers’ National Insurance contributions, as it hits their profit and loss accounts.
While the Industrial Strategy has provided a glimmer of hope to the sector, the fundamental challenges of investment and skills shortages still remain. According to our clients, next year is likely to be flat in terms of growth and confidence remains dampened which is unlikely to lead to investment in skills and technology that the sector so desperately needs. More signposting of where businesses can go for support is also required.
An exception to this otherwise difficult landscape is those businesses that supply to the defence sector. Developments around the world and commitments from the UK government on defence spending mean that firms can be confident in the future growth of the sector and thus invest and expand for the future.
Ginni Cooper, Partner at MHA said, “It is evident from the Industrial Strategy that the government has been listening to businesses, particularly on energy costs and skills shortages. They get an ‘A’ for effort; however, to provide the support that is required, more specific details are needed sooner rather than later.”
