03 october 2022
Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index which has increased slightly from 47.3 in August to 48.4 in September, Mike Thornton, national head of manufacturing at RSM UK, said: ‘The manufacturing PMI in September has seen a slight monthly increase from 47.3 to 48.4, the first monthly rise since February 2022. Whilst this was a welcome arrest in the downward trend, the industry position remains fragile.
‘As challenges surrounding energy and material costs squeeze margins, the government measures outlined in the mini-budget to support businesses in the short-term brings welcome news for manufacturers and other energy-intensive businesses. With corporation tax frozen at 19% and the annual investment allowance remaining at £1m rather than reverting back to £200,000, some financial pressure has been alleviated, enabling manufacturers to invest in plant and machinery and labour. However, in order for businesses to make well-informed decisions for skills and technology investment, urgent clarity is needed from the government regarding the long-term strategy for tax policy and business rates to build the strong foundations necessary to underpin business confidence.’
Thomas Pugh, economist at RSM UK, added: ‘The latest PMI data suggests that the sector is already in a recession. The surge in borrowing costs will reduce investment and employment over the next year as firms cut back on non-essential spend in order to finance debts. As a result, the manufacturing sector is likely to remain in a downturn well into 2023.
The only silver lining is that the recent sharp fall in global commodity prices should start to feed through into lower input costs for manufacturing firms. However, the outlook for energy prices once the government’s six month cap expires will be crucial in determining the fate of the sector.’/