Manufacturers in wait and see mode

Ginni Cooper, partner at MHA, comments on today’s S&P manufacturing PMI data:

Manufacturing PMI fell back further this month to 46.2 highlighting the significant challenges that the sector is facing. This will come as little surprise to most in the industry as manufacturers are holding their breath awaiting the outcome of November’s Budget. They are desperately seeking some certainty to give them the confidence to invest.

The sector has recently been hit by a series of setbacks. Increased employment costs have already forced many businesses to reduce headcount, while lingering tariff uncertainty is clouding future planning. Most recently, the cyberattack on Jaguar Land Rover sent shockwaves across the entire ecosystem. Although government intervention helped stem the crisis, the incident created an immediate cash flow emergency for many small and medium-sized enterprises. Cyber security was flagged as one of the top three challenges facing manufacturers in our latest manufacturing survey and this latest event highlights a critical structural weakness that a shock to one major player is enough to cripple the wider supply chain.

Manufacturers have exhausted their pricing power. They were able to successfully offset years of escalating costs, from Covid-related expenses to fuel inflation driven by the war in Ukraine, by raising prices. However, that strategy is no longer sustainable. Customers are now highly price sensitive and simply buying less.

To revive the sector, the industry needs the Chancellor to back the growth agenda by injecting significant funding into the Industrial Strategy. However, the most effective tool to restore investment and confidence quickly is to be bold and cut Corporation Tax. If you provide businesses with confidence they will generate profits.