Manufacturing sector downturn highlights nation's economic challenges: Olga Watterich

These issues will need to be addressed in order to get the economy back on track and get the wealth of the nation growing once again.

The continued difficult trading conditions for firms in Yorkshire and the Humber was reflected last week with the publication of the CBI’s latest Growth Indicator – which measured the responses from almost 700 firms – and highlighted just how challenging the situation is.

In the three months to August, the CBI Growth Indicator showed the manufacturing sector had suffered from its sharpest decline in output since September 2020.

The service industry continued its downturn over the same period, with consumer services particularly continuing to see a significant contraction.

The CBI Growth Indicator also forecast business activity will continue falling at a broadly similar pace over the next quarter.

On Friday, figures from the manufacturing sector produced by the S&P Global/CIPS UK Manufacturing PMI survey reiterated the findings from our latest Growth Indicator.

They suggested that manufacturing had contracted at its fastest rate since the start of the Covid pandemic in the UK in 2020.

With interest rates now at 5.25 per cent, firms are continuing to face additional costs for credit.

A further rate rise is being widely predicted when the Bank of England’s Monetary Policy Committee convenes later this month.

Our quarterly Distributive Trades Survey found retailers had a summer to forget with sales in August falling at their quickest pace in over two years.

With interest rates continuing to put pressure on household finances, retailers foresee cuts to investment over the next year.

The woes of the retail sector have been highlighted by the case of Wilko, where some 12,500 employees are at risk of redundancy after the home furnishings chain was placed into administration.

As Parliament returns, the Chancellor Jeremy Hunt will be preparing for an Autumn Statement of great significance.

This is a critical time for the country, economically, politically – with an election on the horizon - and for businesses and households right across the UK.

Firms and communities across the country are struggling.

And for many, the UK’s ambition to be a high-skill, high-wage, high- growth economy feels on hold.

That’s why the CBI is arguing for a renewed focus on building the productive capacity of the economy, which is the surest way to drive up sustainable growth and people’s living standards in Yorkshire and the Humber.

Olga Watterich is CBI Deputy Regional Director for the Yorkshire and the Humber region