Following the release of the latest UK manufacturing PMI today (1 November), Ginni Cooper, partner at MHA, believes manufacturers have little leeway for price reductions, even though material and energy costs have started to plateau:
“Whilst confidence may be up slightly compared to previous months it is no surprise that activity levels and short term growth expectations are on the decrease. There is increased pressure on manufacturers to pass on falling prices, despite an overall increase in costs. Inflation has started to ease and raw material prices and energy prices may have been falling but they are still higher than they were. Coupled with increased interest rates and irreversible wage bill increases compounding year on year, margins will be severely affected by any potential price reductions to customers.
“The recent announcement to axe investment in the northern leg of HS2 will further hamper business confidence. Manufacturers need certainty and require the government to articulate its revised commitment to invest in the country’s infrastructure. In the absence of any such narrative, manufacturers may well scale back any growth plans in the short term.
“The upcoming budget will be an opportunity for the government to show it cares about the sector and that it has a plan. We need better strategies to address the skills gap and to drive productivity and confidence. This could involve rewards for meaningful engagement with schools and colleges, or incentives to encourage skilled workers back in to work. Tax reliefs for investment in AI or green technologies would also go some way to increasing engagement. Security and a long-term vision will be the driver for increased optimism and investment in UK manufacturing.”
www.mha.co.uk
