British manufacturers are showing a cautious outlook as recent economic changes weigh heavily on their performance, according to the Confederation of British Industry (CBI). In the current month, factories have reported a downturn, influenced by increases in taxes and wages that took effect in April.
However, there is some hope, as certain sectors, particularly aerospace and defence, are poised to benefit from a projected rise in defence spending across Europe. The CBI’s latest survey indicates that manufacturers’ output expectations for the next three months have fallen back into negative territory, registering at -2 in March after a rise to a three-month peak of +8 in February.
CBI lead economist Ben Jones commented on the current state of the manufacturing sector, stating that “conditions remain subdued.” While there are notable strengths in specific areas, such as aerospace and defence, many companies are reporting ongoing weakness in their order books.
A significant factor contributing to this cautious sentiment is the hesitance of customers to move forward with capital investments. This is largely due to the increases in social security contributions for employers and the rise in Britain’s minimum wage, which took effect in April.
As a result, manufacturers are feeling pressure and uncertainty in the market. Additionally, the headline industrial orders index from the CBI has dropped to -29, a slight decrease from -28 in February, which is well below the long-term average of -13.
Though there has been a slight improvement in the export order balance, it remains at a four-month high of -29, still trailing behind the average. These figures reflect the ongoing challenges facing the UK manufacturing sector.