European manufacturing sectors are experiencing a severe downturn, with both the UK and Eurozone reporting concerning figures for November. The manufacturing PMI in the UK plummeted to a nine-month low of 48, marking a significant drop from October’s 49.9, whilst the Eurozone’s situation appears even more dire with a PMI of 45.2.
France, Germany, and Austria have been particularly affected by this decline. French manufacturing hit a troubling 43.1, falling from October’s 44.5, whilst German factories recorded the fastest drop in output across the region. The situation in Italy is equally concerning, with its factory sector experiencing its most rapid shrinkage in a year.
British manufacturers are facing multiple challenges, including Brexit-related border checks hampering exports and increased operational costs. The recent budget announcement by Rachel Reeves has added to these concerns, with planned increases in employer national insurance and the national minimum wage set to impact manufacturing costs significantly in 2025.
Supply chain disruptions continue to plague the sector, with ongoing conflicts in the Middle East and port disruptions contributing to elevated component and raw material costs. The combination of high costs, low demand, and increased uncertainty presents a challenging outlook for manufacturers across the region.
Hamburg Commercial Bank’s chief economist, Dr Cyrus de la Rubia, offered a stark assessment of the situation, stating that the numbers “look terrible” and suggesting no immediate signs of recovery for the Eurozone’s manufacturing sector. The impact of these challenges is particularly pronounced among smaller businesses, with many EU-based companies now seeking manufacturing partners within the Eurozone rather than dealing with UK-based suppliers.
The manufacturing sector’s outlook remains bleak as we move towards 2025, with political uncertainty in key markets, potential US trade barriers, and ongoing global economic challenges continuing to impact business confidence and investment decisions.
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