Following the release of the latest UK Manufacturing PMI today (3 May), Ginni Cooper, partner at MHA, believes the sector faces a bumpy road over the coming months, as the rising cost of energy and raw materials becomes harder to pass on and competition for skilled labour get fiercer:
“Consumer demand remains high in the UK but optimism amongst manufacturers is beginning to wane as the combination of high energy prices and escalating raw material costs continue to put pressure on margins. Businesses have been forced to make consecutive sales price increases in recent months but manufacturers are now worried that any additional price hikes will not be sustainable in the face of the worst cost of living crisis seen for a generation.
“Employment in the sector remains buoyant and wages continue to rise due to the sustained demand for skilled workers. Businesses are now placing greater emphasis on strategies to retain talent.
“The ongoing conflict in Ukraine is also having a detrimental impact on manufacturers, driving up oil and gas prices and exacerbating supply chain issues the industry had hoped would subside at the start of the year. A variety of sectors are affected, from food manufacturers seeing decreased availability of raw materials such as wheat, grains and oils through to the automobile industry struggling to obtain key electrical components. As long lead times and ever-increasing raw material prices place a greater strain on working capital, businesses must remain mindful of their cash flow in the short to medium term.”