British factory leaders are drastically revising their investment strategies following Rachel Reeves’s Budget announcement, as the Chancellor’s £40bn tax measures send ripples of uncertainty through industrial supply chains.
The latest S&P Global purchasing managers’ index revealed manufacturing output contracted at its most severe rate in nearly a year during November, with the index dropping to 48, marking a nine-month low. This figure sits well beneath the crucial 50-point threshold that separates growth from decline, and falls short of initial projections of 48.6.
Business confidence has plummeted to levels not witnessed since the initial lockdown, according to the Institute of Directors. Chief executives across the country are implementing stringent measures, including reduced pay increases, staff redundancies, and price hikes to manage the £25bn surge in National Insurance contributions.
Rob Dobson, S&P Global director, highlighted the mounting challenges facing manufacturers, citing increased labour costs from recent Budget announcements and escalating geopolitical tensions, particularly regarding global protectionism. These factors have created an environment characterised by elevated costs, diminished demand, and heightened uncertainty.
The employment landscape has also deteriorated, with November witnessing the second instance of job losses in three months, reaching the fastest rate of decline since February. Industry experts attribute these cuts directly to mounting cost pressures and weakening demand conditions.
The manufacturing downturn extends beyond British borders, with the eurozone’s three largest economies – Germany, France, and Italy – experiencing similar contractions. The European manufacturing PMI settled at 45.2 in November, indicating a sustained period of decline across the continent.
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