Manufacturers adopt pre-budget ‘wait and see’ approach

Britain’s manufacturing industry contracted for the first time in six months in October as companies took a “wait and see approach” before the budget.
A survey from S&P Global showed that in recent weeks manufacturers had reported a slowdown in orders from domestic customers who wanted to see what was in the chancellor’s announcement before committing themselves to new contracts.
The S&P Global UK manufacturing purchasing managers’ index (PMI) returned a reading of 49.9 in October, down from 51.5 in September. It is the first time that the reading has dropped below 50 since April. Anything less than 50 suggests the sector is contracting rather than expanding.
“UK manufacturing started the final quarter of the year on an uncertain footing amid speculation on government policies ahead of the budget, which was widely reported to have led to a wait-and-see approach on investment and spending,” Rob Dobson, director at S&P Global Market Intelligence, said.
The drop-off in demand from domestic customers added to a continuing loss in overseas business. The survey showed that new export orders fell again in October for the 33rd consecutive month, with demand from China, Europe and the US particularly weak.
Manufacturers have been battling higher input costs for much of the past few years but there have been signs of improvement of late. Input cost inflation fell to a ten-month low and at a pace S&P said it had rarely seen over the survey’s 33-year history.
A growing number of manufacturing firms are seeing prices of things such as electronics, energy, metals and paper stabilise or, in some cases, begin to fall.
Supply chains “remained under stress” in October, with delivery times rising to their longest since February, which respondents put down to the Red Sea crisis and the port strikes over in the US.
With the budget now out of the way, economists expect demand from domestic customers to improve again over the coming months. Manufacturers are preparing for that too. Despite a slow October, UK manufacturing employment increased for the third time in the past four months, albeit the rate of increase was “only modest”, S&P said.
Dobson said the November survey would be “especially keenly anticipated” as it would give an idea of the short-term impact of the budget on conditions and confidence in the sector.