Manufacturers fear Labour government will ‘derail growth’
Manufacturers continued to see output decline in June, fresh data has shown, as most business owners are now looking at how they can grow under the Labour government.
The UK government last week unveiled its industrial strategy aimed at giving high-growth sectors such as advanced manufacturing confidence over the next ten years.
But fresh research by S&P Global has highlighted business fears that Labour policies and President Donald Trump’s tariffs could thwart growth ambitions as markets become shakier.
Its latest purchasing managers’ index (PMI) showed that the decline in output, new orders and employment slowed down in June.
Rachel Reeves’ taxes and President Trump’s tariffs have combined to squeeze on firms’ profits and business prospects in recent months, with production and employment now declining for eight consecutive months.
In signs that manufacturers are turning a corner, the PMI’s employment balance rose to 44.3 from 42.4 in May, though it remains well below S&P Global’s 50-figure benchmark for neutrality.
Business optimism hit a four-month high but company owners are wary that Labour policies, tariffs and regional conflicts could scupper growth ambitions.
S&P Global director Rob Dobson said the PMI points to “stabilising” conditions as 46 per cent of manufacturers said a recovery in sales and new product launches, as well as efforts to move into new markets, could make production levels higher in a year’s time.
“Any hopes for stabilisation remains fragile and subject to potential headwinds that could severely impact demand, supply chain reliability and future growth prospects, as manufacturers continue to caution their optimism with concerns about heightened geopolitical tensions, weak global markets, tariff uncertainties and fears over the direction of future government policy,” said Dobson.
Labour ministers last week unveiled plans to cut energy costs for 7,000 manufacturers by as much as a quarter from 2027.
But a report by tax advisory Ryan revealed the largest industrial companies would have to pay £685m more in business rates from next year.
Labour tax plans
The Labour government could yet hike taxes further in the autumn due to tightness in public finances and demand more of major manufacturers.
City analysts have projected tax rises worth up to £20bn this year.
Some businesses have reportedly explored moving factories abroad to avoid tariffs and high energy bills in the UK.
The carmaker Lotus said it would not close its Norfolk factory amid speculation it would be moving the plant abroad.
“Lotus Cars is continuing normal operations, and there are no plans to close the factory. We are actively exploring strategic options to enhance efficiency and ensure global competitiveness in the evolving market,” the company said.