Following the release of the latest UK Manufacturing PMI today (March 1), Chris Barlow, partner at MHA, believes high consumer demand has delivered a boost to the sector but that the Chancellor now needs to use his Spring forecast statement to protect the UK economic recovery against the consequences of Russia’s invasion of Ukraine:
“Optimism is high across UK manufacturers, with demand and consumer confidence growing as the country steps away from all Covid-19 restrictions. However, recent international geopolitical events – namely the conflict between Russia and Ukraine – could leave the sector facing a potential deluge of issues. Indeed, Russia’s invasion of Ukraine is set to significantly worsen existing supply chain challenges, drive up the cost of fuel and increase costs of materials such as iron and palladium. Forthcoming tax rises such as National Insurance from next month (April 6) are also a major risk for UK manufacturers.
“The Chancellor cannot fall asleep at the wheel. It’s vital the government takes quick steps such as postponing the planned rise of National Insurance and working with energy providers to mitigate peaks in price to ensure the country’s economic recovery does not fall off the precipice. All eyes will be on Rishi Sunak and his Spring forecast statement this month (March 23). This now needs to be more of a budget and less of an economic update and forecast.
“The impact of events in Eastern Europe is already been felt by the UK. If the conflict in Ukraine is prolonged, it poses a real threat to the UK’s economic recovery as the sanctions imposed by many Western countries inevitably affect our country. For the manufacturing industry, it has already worsened existing inflationary supply chain pressures. Despite the pleas of The Bank of England, businesses are unlikely to be able to show restraint in managing price hikes as they battle to protect margins.”