Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which rose marginally to 51.9 for September, up from 51.7 in August, Mike Thornton, Head of Industrials at RSM UK, said: “Strong orders, increased purchasing activity, lower stocks of finished goods and another uptick in employment indicates manufacturers are moving in the right direction. This is further evidence that the overall sector growth, while modest, looks both sustainable and resilient.

“However, manufacturers are bracing for a challenging period. Sharp hikes in wholesale natural gas prices are expected to filter into electricity bills over the coming months, causing renewed concerns around cost pressures. Manufacturers won’t benefit from the VAT cut to electricity bills that has been introduced to households, so some will bear the full force of the price jump.

“The launch of the British Industrial Competitiveness Scheme today could provide qualifying businesses with much-needed relief of reduced energy prices. While this is a welcome measure for the sector, not all manufacturers will qualify. Expanding the scope is needed to support growth and ensure UK manufacturing can compete globally as it navigates the energy cost challenges expected to hit over the coming months.”

Thomas Pugh, chief economist at RSM UK, said: “The September PMI suggests that this years’ revival in the manufacturing sector has further to go. Manufacturing output is up 1.8% so far this year, its strongest period of growth in two years. The PMI data also suggests manufacturers have been increasing employment this year, a good sign of improving confidence.”

“However, the rise in the input and output prices balances suggests the latest wave of higher energy prices is feeding through into costs and will eventually feed through into higher goods prices across the economy. That combination of resilience and rising inflationary pressures makes it more likely that the Bank of England will hike interest rates in November.”

Related news