Manufacturers boosted by uptick in new orders, but headwinds remain
Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which has increased to 47.7 in June, up from 46.4 in May, Mike Thornton, Head of Industrials at RSM UK, said: “The manufacturing PMI increased for the second consecutive month in June, showing signs of improvement across the board. The new orders index saw the most notable monthly uptick, rising to the highest level since October 2024, which is contributing to growing industry optimism, a trend that’s likely to continue following this week’s trade deal between the US and UK coming into force. However, the PMI is still below 50 and there are both geopolitical and domestic factors driving caution in the market.
“While there’s a lot of noise around tariffs reducing to 10%, and the potential benefits for British car makers in particular, steel and aluminium remain at 25%, with key UK subsectors including food manufacturers concerned by the lack of clarity and the risk of becoming globally uncompetitive. In addition to overseas trade tensions, the UK has further domestic burdens including high energy costs and taxes which are equally as damaging.
“Although the Industrial Strategy outlined new policy to address high energy costs for industrial businesses, it seems they could still be hit with new property taxes to offset cuts to energy bills. Despite this, the rise in the employment index suggests that recruitment plans have normalised following the economic shock created by the changes to employers’ NICs introduced in April.”
He added: “It’s encouraging to see manufacturing activity is heading in the right direction, with increases to new orders and export orders hopefully beginning to bring more confidence to business to invest and recruit. While the Industrial Strategy made bold commitments to support advanced manufacturing, including doubling business investment and funding innovation and automation, businesses across the wider supply chain need clarity and support to avoid being sidelined, ensuring the UK remains globally competitive.”
Tom Pugh, Economist at RSM UK, said: “The rise in the manufacturing PMI in June is another sign that the worst of ‘awful April’s’ tax and tariff turmoil is behind us and the economy is starting to recover.
“Indeed, the rise in the employment index to its highest level since March suggests that worries about the weakness in the labour market in April and May should start to ease in the second half of the year.
“At the same time, the drop in the input prices index to its lowest level since December and another drop in the output prices balance will give the MPC a bit more confidence that disinflation is continuing, despite the recent tax-driven jump in inflation.
“Finally, the increase in the suppliers’ delivery time index to slightly above its 2024 average after dropping below it in May suggests that there hasn’t been any significant disruption to supply chains emanating from tariffs yet.”