Manufacturers falter as Reeves urged to fast-track growth policies
Manufacturing output continues to slump, according to the UK’s largest industry body, as bosses are urging Chancellor Reeves to back up training and technology policies with “short-term delivery”.
The UK government set out its long-awaited industrial strategy earlier this week where it listed areas of the economy which had greatest potential for growth, including advanced manufacturing and clean energy industries.
But a new survey by the CBI has found that manufacturers have seen production fall by as much as 23 per cent in the three months to June, which is similar to levels recorded for the quarter leading up to May.
Researchers said 15 out of 17 sub-sectors recorded a decline in output, which included the UK’s giant chemicals sector while several businesses in mechanical engineering also reported a fall in production.
Manufacturers also said order books both on a domestic and international basis remained significantly below the long-run average.
Fresh data points to the constraints manufacturers are facing up and down the country, with higher employment taxes introduced by Reeves and low demand levels, partly created by a weak global economic outlook and trade tensions, putting the crucial sector under intense pressure.
Manufacturers want quick action
Business leaders are still working through details published in the industrial strategy, with further consultations to take place on which firms are supported with subsidies bringing electricity bills down by a quarter.
The government’s Spending Review also outlined plans to invest in skills and training, with a crackdown on immigration set to test the strength of Britain’s workforce.
CBI lead economist Ben Jones said high energy costs and pervasive skills shortages had damaged manufacturers, with owners now looking for the government to “dismantle barriers to growth”.
“With long-term strategies presented, the government must now continue to back up its ambitions with short-term delivery,” Jones said.
“This includes rolling out welcome energy cost interventions as soon as possible, delivering on growth and skills levy flexibility, and pushing technology adoption to boost productivity.”
Pantheon Macroeconomics’ Elliott Jordan-Doak said the CBI’s latest industrial trends survey data had “bright spots” as it suggested the sector was now recovering from turmoil seen in April after Trump unveiled sweeping tariffs.
“We are optimistic that the worst of the slowdown in manufacturing is behind us, but think that sentiment and activity in the sector will remain weak for some time to come,” Jordan-Doak said.
“Standard measures of policy uncertainty are still far higher now than in 2024 on average, for instance, so the shadow of higher tariffs on global trade remains present.
What’s more, barriers to trade will likely settle at higher levels than before Trump was elected. Those frictions will weigh on the manufacturing sector to a greater extent than services firms for instance.”