British manufacturing output contracted at its sharpest rate in nearly a year during November, highlighting deepening challenges within the sector as it navigates increased taxation and potential trade disruptions.
The S&P Global manufacturing purchasing managers’ index declined to 48 in November, marking its lowest point in nine months and falling from October’s 49.9 figure. This downward revision from the preliminary November reading of 48.6 indicates a more severe contraction than initially estimated, disappointing analysts who had anticipated no changes.
New orders experienced their steepest decline since February, as businesses recalibrated their investment strategies amidst growing uncertainty over domestic economic demand and escalating geopolitical tensions. The aftermath of Rachel Reeves’ October budget, which implemented £40 billion in tax increases, including higher employer national insurance contributions, has prompted firms to reassess their capital expenditure plans.
The export sector continued its prolonged struggle, marking its 31st consecutive month of decline. British manufacturers faced reduced demand across major markets including China, the United States, Europe, and the Middle East. Small manufacturers bore the brunt of November’s downturn, with many facing significant pressure from the upcoming increase in employers’ NICs.
Employment levels within the manufacturing sector showed a concerning decline, while operational costs increased, partly due to elevated transportation expenses caused by ongoing Red Sea trade disruptions. Despite these challenges, over half of surveyed manufacturers maintained optimism about future trading conditions, though concerns persist regarding geopolitical tensions, domestic political uncertainty, and rising employment costs.
The manufacturing sector’s contraction, while representing a relatively small portion of the UK’s GDP, adds to mounting evidence of economic deceleration in recent months. This trend aligns with the Institute of Directors’ reports indicating business confidence has fallen to its lowest levels since the early stages of the Covid-19 pandemic.
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