Survey Finds UK Manufacturing Sector Experiencing ‘Solid Revival’ for Firms

A recent survey conducted by the Chartered Institute of Procurement and Supply (CIPS) and S&P Global revealed that the UK manufacturing sector experienced growth in production levels and new business activities in May. This growth was the fastest recorded since early 2022.

According to Rob Dobson, director at S&P Global Market Intelligence, “May witnessed a strong resurgence in UK manufacturing activity, with production and new business levels rising at the fastest pace seen since early 2022.”

For the first time in over two years, all three product categories—consumer, intermediate, and investment goods—showed expansions simultaneously, regardless of company size.

While domestic market strength was a major factor in this growth, there were also indications of stabilization in overseas demand.

Related Stories

New business placements with British manufacturers increased for the second time in three months, although export orders experienced a decline for the 28th consecutive month.

The survey noted a decrease in new work from the United States, the EU, and the Middle East, which, despite being the weakest since March 2022, indicated a positive trend.

Business confidence among UK manufacturers reached a 27-month high, with 63% anticipating higher production volume in a year’s time.

While optimistic about future economic growth and enhanced export orders, some firms expressed concerns over political and economic uncertainties both domestically and internationally.

These developments follow disruptions in global supply chains earlier this year due to various factors, including freight diversion stemming from the Red Sea crisis.

Furthermore, conflicts in Ukraine and escalating tensions in the Taiwan Strait and South China Sea have also impacted UK businesses.

Geopolitical tensions remain a major concern for senior procurement leaders, with 85% of respondents fearing potential disruptions to supply chains over the next three years.

Inflation

In May, input buying slightly increased, signaling a break in the trend of reduced purchasing activity seen over the past 22 months. Although input costs rose for the fifth consecutive month, the rate of increase was lower compared to April.

The survey indicated increased costs for chemicals, metals, paper, polymers, pulp products, and timber in May.

While manufacturing costs rose in some sectors, there was a decrease in purchasing costs for investment goods for the first time this year. Additionally, cost inflation in consumer goods significantly eased in May.

Output prices increased in the consumer and intermediate goods sectors, but decreased for investment goods producers.

Mr. Dobson commented on the mixed picture of price pressures in the manufacturing sector, stating that while output charge inflation strengthened, an easing in the rate of input cost increase could prevent enduring price pressures.

Despite the positive trends in production and new business activities, high prices across the manufacturing sector might prompt the Bank of England (BoE) to delay interest rate cuts until inflation subsides further.

The BoE aims to observe a stable decline in inflation before making adjustments to the current historically high interest rate of 5.25%.

Last November, Prime Minister Rishi Sunak pledged to position the UK as a global manufacturing leader. This commitment followed the Autumn Statement, which announced over £4.5 billion in funding for manufacturing industries, including automotive, aerospace, clean energy, and life sciences.

This report includes contributions from PA Media.