Optimism in the UK’s manufacturing sector fell in June for the first time in 14 months. This was revealed in the latest Business Trends report from BDO LLP which also suggested difficult operating conditions were the problem.
The report tracks optimism within the manufacturing sector in an attempt to predict growth. The index for measuring this fell from 121.0 in May to 119.5 in June. Being above 100 suggests that there will be long term growth, so the numbers themselves are still good, but it may be worrying to some in the industry that it has fallen.
The fall indicates that businesses are being more careful in their approach. The report says that it’s difficult operating conditions that are giving manufacturers pause for thought.
In the meantime, the service sector has seen a rise in optimism. In May, the index sat at 101.1, but that has now increased to 101.9 for June. Due to the size of the service sector in comparison to the manufacturing sector, this mean that the UK’s average business confidence rose by 0.4 and hit 104.8 in June.
Peter Hemington, a BDO LLP partner, said: “UK manufacturers are under growing pressure from a shrinking pool of skilled workers and potential input cost increases, but confidence in the sector is high and firms are still looking to expand well above their long term trend rate over the next six months. This month’s dip in confidence is a rational response to the issues that businesses face and nobody should have expected the stellar growth we’ve seen in manufacturing so far this year to go on forever.
Image from the Department of Business, Innovation and Skills.