13 MARCH 2025
The OECD survey of confidence in the UK manufacturing sector (red line) paints a pretty bleak picture for Britain’s industrial sectors.
Sentiment has taken a sharp leg lower since last year’s Autumn budget, extending a downtrend that began in late 2021. Business leaders cite escalating operating costs and a rising tax burden as the main drivers of this multi-year downtrend.
Encouragingly, consumer confidence (blue line) has recovered strongly from its 2022 low despite persistent cost-of-living pressures. A resilient labour market and elevated wage growth have evidently buoyed household activity; average weekly earnings were up 6%y/y in December.
There is a good chance that these trends reverse as the year unfolds.
The health of UK manufacturing is intricately linked to the global cycle, so the expected pick up in US and Chinese growth should spark a rebound in UK industrial activity.
Conversely, consumer confidence may struggle in the face of rising cost pressures and heightened political uncertainty.
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