Manufacturers accelerate job cuts as firms brace for ‘gloomy’ year
Manufacturers are shedding staff at the fastest pace in more than four years, according to new data, as they wrestle with soaring energy bills and Chancellor Rachel Reeves’ tax hikes bite.
The downturn in manufacturing output slightly eased in the quarter to April, a survey of hundreds of firms by the Confederation of British Industry (CBI) found, suggesting that there may be some pockets of resilience within the sector.
But several businesses are suffering the “cumulative burden” of tax rises and a higher national living wage, the CBI said, as headcounts are plummeting.
More manufacturers reported concerns about poor “conditions abroad”.
President Trump’s all-out trade war, which includes tariffs on steel and vehicles made in Britain, putting the wider sector on edge as more companies said they expected orders to decline in the three months to July.
Reeves’ £20bn hike to employers’ national insurance contributions (NICs), which came into effect earlier this month, has forced manufacturers to rethink their budgets and plan ahead.
More companies are planning to restrict investment on new machinery and innovation. Training and retraining investment plans are at their weakest level in five years.
Manufacturers ‘feeling the rising costs burden’
Ben Jones, the CBI’s lead economist, said manufacturers seemed “gloomy about their prospects” amid a bleak outlook.
“The combination of financial pressures, market instability and falling confidence is leading manufacturers to cut back employment and investment,” he said.
“The wider geopolitical environment is becoming increasingly challenging for exporters, with export optimism falling sharply for a second successive quarter and export order volumes now hovering around post-pandemic lows.
“Firms are already feeling the cumulative burden of rises in NICs and the National Living Wage – and tariffs represent another headwind for the business sector. The government needs to view every decision through the lens of kickstarting growth and incentivising investment.”
CBI’s data is just the latest set of disappointing news for the UK’s manufacturing sector.
Make UK said manufacturing output declined in the first quarter of the year, the first time there had been a fall in the first three months of the year in a decade.
The industry body forecasted last month that manufacturing would contract by 0.5 per cent this year. Its results were described as “ominous”.
S&P Global separately reported on Wednesday that manufacturing output in April had continued to slide as exporters saw sales drop amid an escalating global trade war.
President Trump has softened his rhetoric on tariff war as manufacturers are waiting tensely to find out if a trade deal will be agreed before baseline ten per cent tariffs on all goods will come into effect.
But the UK stands to suffer from the spillover of aggressive tariffs between the US and China.
Car manufacturers have already been hit harder as tariffs of 25 per cent on imports to the US have remained, affecting around £9bn worth of trade between Britain and America.
The Office for National Statistics revealed earlier today in a fortnightly survey of businesses that employers’ biggest concern was the high costs of labour.