Business Costs Near Tipping Point Warnings from Manufacturers

The rising costs of business are driving UK manufacturers toward an investment tipping point, according to a survey conducted by Make UK, the manufacturing organisation. Nearly 90 per cent of the executives surveyed expect their employment costs to increase this year, with 66 per cent also anticipating a spike in energy costs.

Major concerns have emerged regarding the growing business costs, as nearly two thirds of manufacturers recognise these as a significant risk in the coming year. Make UK notes that this situation could lead to cancelled or relocated investment plans. Just over 40 per cent of manufacturers view the UK as an attractive place to invest, a sentiment shared by an equal proportion of non-UK businesses surveyed.

The forecast for the manufacturing sector is grim, with predictions of a 0.5 per cent contraction this year. Despite this, executives exhibit a cautious optimism, with almost two thirds believing that opportunities will outweigh risks moving forward. About 57 per cent maintain that the UK remains competitive for manufacturing operations.

Industry leaders have praised the government’s industrial strategy for fostering a more positive outlook, with 63 per cent expressing hope that this strategy will stimulate future investment plans. However, dissatisfaction is prevalent regarding the most recent autumn budget, as more than half of manufacturers stated they would have reduced their investment plans if further tax increases had been imposed on businesses.

Stephen Phipson, chief executive of Make UK, highlighted the overarching concern that not only is growth stagnant, but urgent action is required to enhance the UK’s attractiveness as a site for manufacturing and investment. The time for significant change is now.

A separate survey reveals that optimism among UK businesses has plummeted to its lowest point in nearly five years. Companies are increasingly apprehensive about a slowing jobs market and weak demand in the coming year.

BDO, a professional services firm, reports a decline in the monthly measure of sentiment, falling from 93.45 to 90.01. This is the weakest level recorded since January 2021. A drop in optimism was noted among manufacturers and services firms. Rising business costs are leading to diminished turnover expectations, as highlighted by Scott Knight, head of growth at BDO.

Although there has been a slight increase in the output index, any growth has been wholly concentrated in the services sector. The inflation index has seen a minor decrease, while employment prospects continue to decline.