Q1 Manufacturing Outlook
Manufacturing hits the buffers as tax and cost increases bite.
The UK manufacturing sector is facing significant challenges as rising employment taxes, increased business costs, and fears of a global trade war begin to bite. The latest Make UK/BDO Manufacturing Outlook report reveals a troubling picture of contracting output and declining orders, forcing businesses to freeze recruitment, consider redundancies, and delay investments. With the sector now forecasted to contract in 2025, industry leaders are calling for immediate government intervention to provide relief and long-term strategic support.
Key findings from the Q1 Outlook
Output and orders have contracted, marking the first decline in output in the first quarter of a year in a decade.
Domestic orders are falling, while export orders are slowing, offering little cushion to struggling manufacturers.
Hiring freezes and job cuts are on the rise, with half of companies freezing recruitment and more than a quarter considering redundancies.
Investment is being postponed, with a third of companies delaying planned investments and 15% cancelling them altogether.
Manufacturing is projected to contract by -0.5% in 2025, a downward revision from the previous forecast of -0.2%.
An industry at a crossroads
This all emphasises the urgent need for the government to take decisive action, in particular we are calling for reforms to the business rates system to remove investment disincentives and the implementation of policies that support industrial decarbonization and workforce skills development.
Manufacturers feel like they are currently wading through treacle, facing barriers and increased costs at every turn. However, there is no more resilient a sector in the economy, and they will find ways to adapt. The one light at the end of the tunnel is the prospect of a modern, long-term industrial strategy which must be put in place to integrate manufacturing policies with energy, trade, and skills.
Global trade uncertainty
The report also underscores the impact of geopolitical tensions on British manufacturers, particularly in light of new US trade tariffs under Donald Trump’s presidency. The introduction of US tariffs on UK steel and aluminium has already sent ripples through the sector, exacerbating concerns over the potential for an escalating trade war.
Historical parallels have been drawn between Trump's aggressive trade policies and those of former US President William McKinley, known for imposing high import tariffs in the 1890s. While McKinley sought to use economic force to dominate global trade, his policies ultimately led to a major recession in the US. Similarly, today's protectionist measures threaten to stifle economic growth, with the Bank of England warning of potential downturns in the UK economy.
Lessons from the past: how Britain can navigate the crisis
Economic history offers insights into how Britain can respond to the current trade challenges. In the late 19th century, concerns over McKinley’s protectionism led British leaders to pursue economic reforms, modernize infrastructure, and invest in industrial growth.
Joseph Chamberlain, a key figure in UK industrial policy, championed activist government intervention, infrastructure development, and policies to enhance economic resilience. The response to the challenges of the 1890s ultimately spurred a golden age for British manufacturing and financial services.
Similarly, today’s policymakers must act swiftly to shield UK manufacturers from economic instability. By prioritizing industrial innovation, skills development, and investment-friendly policies, the government can strengthen Britain's manufacturing sector against external shocks and ensure long-term economic sustainability.
A critical moment for UK manufacturing
The findings of the Make UK/BDO Manufacturing Outlook report paint a stark picture of the immediate difficulties faced by manufacturers. However, as history suggests, strategic interventions can turn crisis into opportunity.
By fostering a supportive policy environment, reforming business rates, investing in skills, and committing to a long-term industrial strategy, the government can help manufacturing remain a driving force of the UK economy. Without decisive action, however, the sector risks prolonged stagnation, job losses, and diminished global competitiveness.
The message is clear: the time for action is now.
Thank you for reading. For more information or a copy of the report, please visit our website here.