Manufacturers face cost crisis despite hopes for recovery, says report
West Midlands manufacturers are facing mixed conditions as the year ends, according to the latest report from Make UK and business advisory firm BDO.
While output and orders were weak in the final quarter, especially due to the phasing out of older models in the automotive sector, there are signs of improvement in early 2025, with orders expected to rise by +33%, well above the national average.
Job prospects and investment intentions have also seen positive growth, jumping to +29% and +19%.
However, overall business confidence in the region has dropped to its lowest point in a year, driven by rising costs and concerns over the Budget.
It contrasts with the previous survey, when nearly 60% of companies had a more optimistic view of the economy following a change in Government, marking the highest confidence in a decade, except for the post-Covid recovery period.
The survey also revealed that 70% of West Midlands manufacturers have seen costs rise by up to 20% over the past year, with nearly 10% experiencing cost increases of up to 50%.
86% expect costs to rise further due to the Make Work Pay reforms, with 44% predicting a significant impact.
With the Budget adding more financial pressure, particularly through changes to National Insurance Contributions, Make UK has revised its growth forecasts, predicting a -0.2% contraction in manufacturing this year and just 0.7% growth in 2025
Chris Corkan, region director at Make UK in the Midlands, said: “Having faced a cost creep for most of the year, manufacturers in the West Midlands are now facing a cost crisis which has brought a sharp dip in their confidence. While overall conditions had begun to gradually improve during the year, the Budget has brought this to a shuddering halt, with the substantial increase in National Insurance Contributions potentially the straw that might break the camel’s back for some. There is now an urgent need for the Government to look at other measures which might mitigate the impact of the rocketing costs that businesses are now facing.”
Jonathan Lanes, head of manufacturing at BDO in the Midlands, said: “While manufacturers across the West Midlands have welcomed the Government’s Industrial Strategy green paper, optimism across the region is declining, driven by increased input costs and the implications of the latest Budget on employment costs. Increasing investment in improving productivity is vital now more than ever to maintain stability and offer opportunities for growth across the West Midlands and the wider sector.”
