‘Ominous’: UK manufacturing declines amid tax and trade fears
UK manufacturing output fell during the first quarter of the year for the first time in a decade, as fears over a global trade war and rising taxes hit firms.
Output fell one per cent in the first three months of 2025 after a 20 per cent rise in the quarter before, with UK orders dropping seven per cent, according to data from industry body Make UK.
“Albeit the sector wide contraction is only minor, the negative balance at the start of a year is an ominous one,” said the industry body.
Make UK is now forecasting that the manufacturing sector will contract by -0.5 per cent this year, down from a previous forecast of -0.2 per cent, before growing by one per cent next year.
The hardest hit sectors by the fall in output this quarter have been basic metals, which saw a 50 per cent drop in production, followed by electrical and metal products, which fell 12 per cent.
Recruitment intentions in the sector also dipped, falling from an eight per cent increase to a three per cent decline, with half of companies freezing recruitment.
Much of the dip in employment was attributed to measures announced in the Autumn 2024 Budget, with 41 per cent of firms reducing planned pay increases and a quarter considering redundancies.
Fears over a trade war caused by US president Donald Trump have also shaken international purchasing, with export orders growth falling to just one per cent, down from ten per cent in the previous quarter.
“Manufacturers feel like they are currently wading through treacle, facing barriers and increased costs being imposed on them at every turn,” said Verity Davidge, policy director at Make UK.
“The one light at the end of the tunnel is the prospect of a modern, long term industrial strategy which will enable them to plan for the future with confidence in a supportive policy environment.”
Investment activity in the UK manufacturing sector slowed from previous quarters, but still increased five per cent, as a third of firms said they were delaying investment plans, with 15 per cent actually cancelling planned investments.