Manufacturers face perfect storm of economic and geopolitical pressures as demand weakens

02 December 2024

Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index which has decreased to 48 from 49.9, Mike Thornton, national head of manufacturing at RSM UK, said: “Following the Chancellor’s recent fiscal announcement, there has been a wave of concern amongst manufacturers regarding rising costs. The downturn in the headline index coincides with post-budget concerns, particularly around the future implications for employers’ National Insurance contributions (NICs). More notably, there is a noticeable dip in the employment index, which has fallen sharply by four points, with many businesses likely pausing recruitment efforts due to the anticipated financial strain. 

“November continues the downward trend of the previous month, reinforcing that it’s not just about the Autumn Budget. 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. A key challenge for manufacturers in 2025 is deciding whether to absorb or pass on increased costs – weaker trading conditions will inevitably make this more difficult.” 

He added: “There are reasons for optimism however, with future output ticking up, alongside a slight uplift in new export orders, showing some signs of recovery, but remaining below 50. Looking ahead, there’s various geopolitical tensions which will impact industry. The aftermath of the Autumn Budget, coupled with Trump’s proposed tariffs changes in the US are creating the perfect storm of economic pressures for manufacturers. This may prompt businesses to consider reshoring as a strategy to mitigate risk and enhance stability and the publication of the Industrial Strategy next Spring will hopefully provide long-term stability to underpin investment.” 

Mike Thornton
Mike  Thornton
Regional Managing Partner, Yorkshire & North-East and Head of Manufacturing
Mike Thornton
Mike  Thornton
Regional Managing Partner, Yorkshire & North-East and Head of Manufacturing