British manufacturers reported their sharpest decline in confidence since the start of the COVID-19 pandemic, according to a survey by Make UK. The industry group attributed this pessimism to rising costs, including a significant tax increase announced in the October budget.
Make UK’s confidence index dropped to 5.8 in the final quarter of 2024, down from 6.8 in the previous quarter. The group downgraded its 2024 manufacturing output forecast, now predicting a 0.2% contraction compared to earlier expectations of 0.5% growth. While modest recovery is expected in 2025, with an estimated 0.7% growth, this remains significantly below the broader economy’s anticipated expansion rate.
Although manufacturers reported stable output and orders, as well as steady hiring and investment plans, overall sentiment deteriorated sharply. In the previous survey, nearly 60% of firms were optimistic, but escalating cost pressures have eroded this confidence.
“After a year of incremental cost increases, manufacturers now face a full-blown cost crisis, driving a sharp dip in outlook,” said Fhaheen Khan, senior economist at Make UK.
The new government’s budget introduced a £25 billion hike in employer social security contributions, set to take effect in April 2025, alongside a nearly 7% increase in the minimum wage. These changes have exacerbated financial pressures on manufacturers, leading to reduced hiring intentions across the sector.
Recent economic data underscores the broader challenges facing the UK. The economy contracted in both September and October, marking the first consecutive declines in GDP since 2020.