UK factory output falls at fastest rate since February amid tax rise fears
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Manufacturing PMI in December at 11-month low as government policy ‘dampens confidence and raises costs’. Manufacturers in the UK cut back output last month at the fastest rate since February, compounding the gloomy picture for the British economy, according to a closely watched survey.
The purchasing managers’ index for manufacturing fell to 47, down from 48 in November – the weakest for 11 months. Any reading below 50 signals a contraction. The latest evidence of industrial weakness underlines the challenge facing Labour, as it hopes for an economic upturn.
S&P Global Market Intelligence, the data company that compiles the PMI, blamed government policy for the manufacturing squeeze. “Manufacturers are facing an increasingly downbeat backdrop,” said Rob Dobson, a director at S&P Global. “Business sentiment is now at its lowest for two years, as the new government’s rhetoric and announced policy changes dampen confidence and raise costs at UK factories and their clients alike.”.
He added that small and medium-sized companies were being hit hardest, with the survey also showing staffing levels being cut back at their fastest rate since February. Businesses are facing higher tax bills from April, after the chancellor, Rachel Reeves, announced a £25bn increase in employers’ national insurance contributions (NICs) to fund public services.
The NICs increase will coincide with an increase in the national living wage of almost 7%, to £12.21 an hour for over-21s. “Some companies are acting now to restructure operations in advance of the rises in employer national insurance and minimum wage levels in 2025,” Dobson said.
