UK Manufacturing Faces Biggest Job Cuts Since 2020 Amid Cost Surge

The UK manufacturing sector is grappling with its most severe job cuts in four years, as a sharp decline in activity signals deepening troubles for the industry. According to the latest S&P Global UK Manufacturing PMI survey, the sector’s index dropped to 46.9 in February, down from 48.3 in January, marking a 14-month low. This decline indicates contraction for the fifth consecutive month, further fueling concerns over the sector’s stability.

Rising costs, driven by higher taxes and inflation, have been increasing pressure on manufacturers, forcing many to cut jobs, reduce working hours, and freeze hiring. Factory expenses have surged following tax hikes introduced in the October Budget, with manufacturers warning that these rising costs are squeezing profitability and leading to reduced output.

Chancellor Rachel Reeves’ decision to raise company national insurance contributions to fund public service improvements has sparked widespread concern in the industry. With additional cost burdens and the minimum wage set to increase in April, many manufacturers are making significant cutbacks to stay afloat.

Rob Dobson, director at S&P Global Market Intelligence, warned that soaring costs are “driving up inflation fears and intensifying the downward trend in staff headcounts.” Adding to the sector’s woes, manufacturers are battling falling demand, lower order volumes, weak customer confidence, and ongoing supply chain disruptions both domestically and internationally, as reported by Wales Online.

Despite the current downturn, business optimism reached a six-month high in February, as firms look toward investment spending and an expected economic recovery to boost future prospects.

However, Tom Pugh, an economist at consultancy firm RSM, cautioned that external economic factors remain a serious concern. “A combination of weak growth in our major trading partners such as France and Germany, combined with uncertainty around US tariffs, and therefore a potential global trade war, continues to weigh heavily on manufacturing firms.”

He added that the slump in exports is “clearly hampering the manufacturing sector, and given the likelihood of further tariffs and trade disruption, it doesn’t look like this will improve any time soon.” Still, Pugh highlighted some positive signs, stating, “The good news is that the domestic economy should recover through this year, helping to support some increase in activity.”

While the manufacturing industry struggles with these economic challenges, firms will be hoping that the anticipated economic rebound can bring relief in the coming months.