The manufacturing sector is certainly in a hearty battle at the moment – with the manufacturers themselves holding a higher level of optimism than perhaps the media would suggest, as Tony Wright and I found out in our report on Manufacturing published at the end of last year.

However the Times reported earlier this month that the UK’s manufacturing industry saw the lowest output in 31 months in December 2022. According to the closely-watched S&P/CIPS purchasing manager’s index (PMI). The index fell to 45.3 from 46.5 in November. A figure below 50 indicates a contraction in activity. 

This has been the result of a symbiotic mix of high energy costs, a slowdown in export demand and Brexit-related trade disruption.

In fact City AM reported on the first working day of the year, that higher energy costs sparked by a combination of Russia’s invasion of Ukraine and resurgence in global demand after the end of Covid-19 restrictions, has forced factories to scale back unprofitable activity, then add into the mix a shallower jobs force in Britain since the pandemic and workers demanding inflation busting pay rises has added to factories’ costs – and we have ourselves a very bleak outlook to the New Year. Did someone say new year, new me?

I am one of those odd people who wake before the sun rises and goes running – a way to keep the mind quiet. The other day when I was changing in the office locker rooms the BBC were interviewing various steel and glass manufacturers and staff, who were illustrating to the reporter how they intermittently turn on and off the machines between production, in order to preserve energy and therefore keep costs down, and this was now part of their training as operators.

The BBC was also quick to report that there had been a slew of redundancies and other cost cutting measures. City AM also went on to report that last month factories shed workers to rein in expenditure ahead of a reduction in spending. The PMI employment index dropped to 45.5, its lowest level since August 2020. This makes one think – how much more of a beating can the industry take?

But green energy still gets a shout out, and in a big way, as this is the fairy tale ending we all want. Cheaper energy, saving more jobs AND the planet at the same time. Wonderful. Also, in recent days, there are reports that the wholesale cost of energy is significantly reducing and at a higher rate than predicted. So there will be some respite for weary FDs desperately trying to steady the balance sheet of their manufacturing firms. We are always happy to speak to directors who may want advice on how to approach their fiduciary duties in the current climate.

It is a difficult time for many, and as is always the case when in challenging periods, there are lots of lessons being reveled on how to become more efficient in business. If you want to read our manufacturing report in full to see what the mood of the industry is, then please follow the link below:

https://comment.frpadvisory.com/post/102i2x4/manufacturing-under-the-microscope