Employment at UK factories fell at its quickest pace in over four years this month as the sector grappled with higher taxes and the prospect of a downturn in overseas sales owing to President Trump’s tariffs.
The weighted balance of the Confederation of British Industry’s employment barometer for the manufacturing sector dropped to minus 16 per cent in the three months to April, down from minus 8 per cent in the quarter to January. It was the lowest reading since October 2020.
A £25 billion rise in employers’ national insurance contributions (NICs) took effect on April 6 and a 6.7 per cent jump in the minimum wage applied from the beginning of the month. In response to rising costs, manufacturers have cut back on investment plans for the year ahead, with planned spending on buildings, plants, machinery and training workers all forecast to decline.
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Ben Jones, lead economist at the CBI, said: “The combination of financial pressures, market instability and falling confidence is leading manufacturers to cut back employment and investment, with plans for spending on buildings, equipment, innovation and training all taking a hit.
“Firms are already feeling the cumulative burden of rises in NICs and the national living wage, and tariffs represent another headwind for the business sector. The government needs to view every decision through the lens of kick-starting growth and incentivising investment.”
At the beginning of April Trump announced his “reciprocal” tariffs on nations across the world, although he has since delayed most of them by 90 days. If implemented, they would have taken the US’s effective tariff rate to its highest level in over a century. Factories told the CBI that they expected exports to shrink in the coming 12 months.
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Trump’s import taxes are focused on goods rather than services, meaning that they will adversely affect manufacturers. The CBI said that factories think output will marginally contract in the coming quarter and that activity in the last three months decreased only slightly. Trump has signalled his willingness to negotiate with countries, including China, to agree on lower tariffs.
The CBI figures chimed with the April purchasing managers’ index, which showed that activity among manufacturers dropped at the fastest pace in 20 months. The composite PMI, which tracks activity across the UK’s private sector, fell to its lowest point in 29 months in April.
Official GDP figures released by the Office for National Statistics showed that the economy expanded by 0.5 per cent in February, faster than expected. However, economists have argued that growth is likely to slow markedly if Trump’s tariffs ignite a global trade war.
