Manufacturers’ confidence slumps as costs rocket – Make UK/BDO survey
Manufacturers’ confidence slumps as costs rocket – Make UK/BDO survey
Growth forecasts revised sharply downwards
Key findings:- Output returns to levels of a year ago
- Domestic market remains weak compared to exports
- Recruitment and investment activity stable
- Make Work Pay reforms to result in big cost increases
- Manufacturing forecast to contract in 2024, 0.7% in 2025
The Make UK/BDO Manufacturing Outlook Q4 survey shows that while output and orders remain positive, with recruitment and investment intentions stable, the mood among companies has darkened markedly since the last survey.
This contrasts sharply with Q3 when almost six in ten companies (58%) saw a brighter economic outlook under a new Government and when, bar the immediate post-Covid recovery, business confidence among manufacturers had reached its highest level in a decade.
According to the survey, 70% of manufacturers have seen their costs already increase by up to a fifth in the last year, while almost one in ten (8%) had seen their costs increase by up to a half. In particular, the survey shows almost nine in ten companies (86%) will see their business costs increase due to the Make Work Pay reforms, with almost half of companies (44%) saying the increase will be ‘significant’.
With the Budget set to add substantial extra business costs to those that companies were already facing, in particular the changes to National Insurance Contributions, Make UK has cut its growth forecasts with manufacturing contracting by -0.2% this year and growing by just 0.7% in 2025.
In response, Make UK is urging the Government to look at measures which might help alleviate the impact of rising costs, in particular reforms to business rates and current incentives to decarbonise.
Commenting, Fhaheen Khan, Senior Economist at Make UK, said:
“Having faced a cost creep for most of the year, manufacturers are now facing a cost crisis which has brought a sharp dip in their confidence. While overall conditions had begun to gradually improve during the year, the Budget has brought this to a shuddering halt, with the substantial increase in National Insurance Contributions potentially the straw that might break the camel’s back for some.
“There is now an urgent need for Government to look at other measures which might mitigate the impact of the rocketing costs that businesses are now facing.”
Richard Austin, Head of Manufacturing at BDO, added:
“While manufacturers have welcomed the Government’s Industrial Strategy green paper, optimism across the sector is declining, driven by increased input costs, the implications of the latest Budget on employment costs and lacklustre domestic demand.
“An overlay of a turbulent geo-political landscape and talk of potential tariffs adds to future uncertainty in the short to medium term. Increasing investment in improving productivity is vital now more than ever to maintain stability and offer opportunities for growth in the sector.”
According to the survey, the balance on output rose to +20% from -2% in the last quarter, with total orders following a similar pattern, up to +16% from +7% in Q3.
Export orders (+10%) exceeded UK orders (0%) but, the pattern since the pandemic when UK orders have consistently exceeded export orders is forecast to resume in the next quarter at +8% and +7% respectively.
Having gone negative for the first time in four quarters in Q3 recruitment intentions turned positive at +8%, with investment intentions remaining stable at +10%.
Make UK is forecasting that manufacturing will contract by -0.2% in 2024, down from +0.5% in the last quarter, before growing by 0.7% in 2025. GDP is forecast to grow by 0.7% in 2024 and 1.4% in 2025.
The survey of 303 companies was carried out between 28 October and 27 November.
Ends
About Make UK
Make UK, The Manufacturers’ Organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales.
Collectively we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. Everything we do – from providing essential business support and training to championing manufacturing industry in the UK and the EU – is designed to help British manufacturers compete, innovate and grow.
From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused.
About BDO LLP
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.
The organisations we work with are Britain’s economic engine –entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 18 offices across the UK, employing 8,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.