At +24%, the net balance of manufacturing firms expecting activity to increase over the next 12 months was the lowest recorded since 2009. The latest results compared with net balances of +35% in June and +62% in February.
UK manufacturers were much more confident of a rise in activity than other countries in Europe (-9%), while firms in Germany and France gave negative projections for the next 12 months, of -25% and -3%.
Strong expectations among manufacturers also helped boost the overall predicted growth in the UK. The headline index fell to +18% when responses from the wider services sector were taken into account. Hospitality was the only industry to signal a pessimistic outlook, with fears of reduced customer spending and high energy costs.
Inflationary pressures remain elevated, with +80% of manufacturers expecting to raise their salaries over the next 12 months considering the cost-of-living crisis and tight labour market conditions. Selling prices are also likely to rise sharply, albeit not quickly enough to offset a negative outlook for profits. Likewise, -5% of firms expect lower earnings over the next 12 months.
Despite the positive projection, pessimism about profits has led manufacturers to plan reductions in both capital expenditure (capex) and research & development (R&D) spending. Capex and R&D forecasts were the lowest seen since the drop during COVID-19 in 2020, with net balances of -2% and -4%, respectively.
Manufacturers had positive projections for a rise in employment (+7%), though the sector was less optimistic than the wider services sector (+12%).
Commenting on the findings, Maddie Walker, Industry X lead for Accenture in the UK & Ireland, said:
“British manufacturers will need to prove their resilience in the face of a tough winter ahead. Despite confidence being knocked, overall optimism and activity are much higher than across Europe, where the threat of factory closures and ongoing energy crisis looms over production.
“While manufacturers may be tempted to rip up their sustainability plans or R&D spending to relieve costs in the short-term, it's important to pursue a long-term plan in times of change. Sustaining growth with transformative technologies will be critical to protecting factories from further disruption and retaining a positive outlook."
