UK manufacturers’ confidence plummets as costs soar
16 December 2024 
The mood among UK manufacturers has “darkened markedly” in the past three months, according to a new survey by Make UK and business advisory firm BDO. Their Manufacturing Outlook Q4 survey shows that while output and orders are still positive, with recruitment and investment intentions remaining stable, business confidence has fallen at its fastest rate since the pandemic.
Make UK has cut its growth forecasts, and now expects manufacturing to contract by 0.2% this year (down from 0.5% growth it was forecasting three months ago) and to expand by just 0.7% in 2025.
The sharp fall in business confidence among manufacturers contrasts with previous quarter when it hit its highest level in a decade (bar the post-Covid recovery period), when 58% expected a brighter economic outlook under the new Government.
According to the new survey of 303 manufacturers, carried out between 28 October and 27 November, 70% of them have seen their costs rise by up to a fifth in the past year, while 8% have seen their costs increase by up to a half. The vast majority (86%) expect their business costs to increase as a result of the new employment reforms, with almost 44% saying the increase will be “significant”. The UK domestic market remains weak compared to exports.
Make UK is urging the Government to look at measures that could alleviate the impact of rising costs – in particular, reforms to business rates and incentives to decarbonise.
“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,” says Make UK’s senior economist, Fhaheen Khan. “While overall conditions had begun to improve gradually during the year, the budget has brought this to a shuddering halt, with the substantial increase in NI contributions potentially being 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, adds: “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 geopolitical 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.”
