UK manufacturing remains resilient despite further contractions in output

Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which has increased slightly in April to 45.4, up from 44.9 in March, Mike Thornton, Head of Industrials at RSM UK, said: “The headline PMI increased slightly on the previous month, however is still well below 50, most likely driven by ongoing uncertainty towards US tariffs and overseas trade agreements. Notwithstanding these headwinds, the sector continues to show resilience and adapt to these challenging geopolitical changes. Despite the overall downward trend, the falls in quantity of purchases, stocks of finished goods and stocks of purchases suggest that manufacturers are aware of the challenges and are proactively managing their working capital, mitigating excess inventory and preventing money being tied up in unused stock. 

“More encouragingly, we’re seeing a shift in financial equilibrium as output prices are now rising faster than input prices, demonstrating manufacturers are finally able to pass on increased costs, which is critical for navigating further economic pressures such as increases to employers’ National Insurance contributions in addition to tariff uncertainty.” 

He added: “It’s reassuring to see the sector is being resourceful and already focusing on what factors it can control, including pricing and inventory levels, to remain robust. However, the next area of focus will be suppliers’ delivery times, with any potential changes reflective of tension in the supply chain. Although not under immediate stress, manufacturers need clarity and confidence to make long-term investment decisions from the incoming Industrial Strategy, enabling businesses to mitigate risks while also remaining resilient to future shocks.”

Tom Pugh, Economist at RSM UK, said: “While the manufacturing output index rose slightly to 45.8 from 45.3, that still suggests a sixth consecutive month of falling output for the sector.

“What’s more, new export orders fell to 37.9, the lowest level since the global financial crisis, excluding Covid-19. While the US accounts for a relatively small amount of UK goods exports, the uncertainty is clearly dampening global demand and weighing on the sector.

“Another fall in the employment index to 43.0 from 45.2 suggests firms continued to adjust headcounts as higher employment costs came into effect in April. Looking ahead, further falls in employment will also be driven by the deteriorating outlook as firms batten down the hatches. Indeed, the future output index dropped again to 65.8, just two months ago it was 73.4.”