Solid growth for UK manufacturers despite ongoing export challenges

Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index which has increased slightly to 52.5 from 52.1, Mike Thornton, national head of manufacturing at RSM UK, said: “The manufacturing PMI saw solid growth in August increasing to 52.5, the highest level since June 2022. This upward trend, combined with an increase in the employment index to 52.5, signals real confidence as businesses invest in resource and capacity in expectation for a strong pipeline of work. 

“The backlogs of work index has recovered and reached an equilibrium between demand and output. As output has been increasing month on month since the start of the year, albeit with some slight monthly fluctuations, the overall trend demonstrates the sector’s recovery is driven by new orders coming in, rather than running through backlogs of work.” 

He added: “However, this demand is coming from domestic markets, as new export orders have ticked down sharply, which could be due to geopolitical tensions, shipping challenges, and a downturn in activity in key markets, including the Eurozone and China. While manufacturers are certainly in a better position than they were a year ago, all eyes will be on the upcoming Autumn Budget to see what government does to support and accelerate growth. 

“Manufacturing businesses have waited a long time for better market conditions, so government needs to address investment and funding challenges to ensure the UK’s export market remains globally competitive amidst looming energy price hikes and potential tax rises in October.”

Tom Pugh, economist at RSM UK, said: “Another rise in the manufacturing PMI suggests that the sector and wider economy grew at a decent pace in August. Indeed, the jump in the employment balance to 52.5, the highest level in over two years, suggests that confidence in returning to the sector and that hiring is now rising again. Even though the future output index ticked down a little, it remains well above the 2023 average. 

“At the same time, inflation pressures continued to ease, the input and output prices balance both ticked down at the same time as output rises. That will be music to the ears of the MPC.”