Reeves’ tax raids and tariff woes strain UK manufacturers
British manufacturers continued to struggle in May, despite a surprise minor uptick, as tax hikes and tariffs weighed on firms.
S&P Global’s latest PMI survey, which asks around 600 industrial companies about their performance, revealed manufacturers were still battling a tirade of challenges.
The latest figure edged up to 46.4 in May, compared to 45.4 in April – marking the highest level since February. A provisional forecast of 45.1 was initially pencilled in for May.
But the figure – a key metric observing an industry’s potential of expansion – still slumped below the basic threshold of 50, anything above which denotes growth.
S&P cited a “combination of weak global demand, turbulent trading conditions and rising cost burdens” as leading to reduced levels of output, new orders, exports and employment.
Tax headwinds hit firms
Manufacturing firms were forced to battle a duo of rising costs after Chancellor Rachel Reeves employer’s national insurance tax hike came into effect at the beginning of April, along with the increases to national minimum wage.
Reeves upped firm’s NIC 1.2 per cent to 15 per cent, meanwhile the living wage rose to £12.21 simultaneously.
Manufacturing companies slashed employment at the fastest pace in three months on the back of tightening costs and economic uncertainty. Firms reported higher costs passed along the supply chain following the impact of President Donald Trump’s sweeping tariffs.
Rob Dobson, director at S&P global market intelligence, said: “May PMI data indicates that UK manufacturing faces major challenges, including turbulent market conditions, trade uncertainties, low client confidence and rising tax-related wage costs.”
The difficulties were also attributed to a fall in export orders, tied to weaker demand from the US and Europe.
But nearly 50 per cent of manufacturers expected to see output increase over the next 12 months, up from 44 per cent in April.
Dobson said: “There are some signs of manufacturing turning a corner though. PMI indices tracking output and new orders have moved higher in each of the past two months, suggesting the downturn is easing, and came in better than the earlier flash estimates for May”
But he warned conditions remained turbulent “both at home and abroad”.
Dobson said this made “a return to stabilisation or a sink back into deeper contraction likely during the coming months”.