Yorkshire manufacturers 'feeling the squeeze' from interest rate rises

The slowing picture is reflected in weak output (+6 per cent) in the last three months with a similar picture for the next three (+6 per cent). But regional order levels for the final quarter are described as “very strong” (+25) and substantially above the national average.

This mixed picture is reflected in recruitment in the region which was weak last quarter (-25 per cent) but is forecast to pick up in the final quarter of the year (+13 per cent).

Investment intentions have also weakened significantly and are flat (+0 per cent) which is below the national average.

In terms of overall output this year Make UK and BDO are forecasting a contraction of -0.5 per cent, slightly worse than the -0.3 per cent forecast in Q2. However, Make UK downgraded its forecast for 2024 to growth of just 0.5 per cent, down from 0.8 per cent in Q2.

Dawn Huntrod, Region Director at Make UK in the North, called on Chancellor Jeremy Hunt to take action in his forthcoming Autumn Statement.

“Manufacturers are seeing a mixed picture as the potent cocktail of rising interest rates, cost of living and slowing overseas markets bites hard,” she said.

"While it’s clear the Chancellor doesn’t have a financial war chest to try and boost growth he should use his Autumn Statement to bring forward carefully targeted measures which could make a difference to companies’ efforts to boost skills and productivity.

"He should use whatever is available to get the best bang for his buck.”

Steve Talbot, head of manufacturing at BDO in Yorkshire and Humber, added: “Yorkshire manufacturers are starting to feel the squeeze as the Bank of England’s plan to stamp out inflation takes hold.

"In the absence of an overarching industrial strategy from government, businesses will be tightening their purse strings, protecting margins and focusing on building operational efficiencies over the next few months.”

According to the influential S&P Global/CIPS UK Manufacturing PMI survey published earlier this month, the sector has now shrunk for 13 straight months.

The survey’s reading dropped from 45.3 in July to 43.0 in August.

Discounting the pandemic lockdown in the spring of 2020 the survey had not scored that poorly since the 2009 financial crisis.

“Manufacturers reported a weakening economic backdrop as demand is hit by rising interest rates, the cost-of-living crisis, export losses and concerns about the market outlook,” said Rob Dobson, director at S&P Global Market Intelligence.

“While this is being felt across the manufacturing industry, business-to-business companies are especially hard hit.

“Intermediate goods producers saw the steepest drops in output, new orders and employment as a result.”

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: “The constant pressures on business costs from inflation and the systemic weaknesses in the UK and global economies were also driving the fastest fall in new orders since the financial crisis, outside the pandemic years.”