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📈 Interest rates are on the rise again

Manufacturing Mondays
Manufacturing Mondays
Last week was a somewhat sobering week, with the reality of the challenges facing the UK economy really hitting home.
Both consumer price and input price inflation shows no signs of slowing, interest rates on the rise, and UK manufacturing PMI contracted for the first time in a while.
The potent cocktail of issues means Government action is all but inevitable now. Whoever holds the key to No.10 come September 5th will have little choice but to hold an emergency budget to tackle these issues.
We discuss what it all means for UK manufacturing in today’s issue, plus why manufacturers are considering reshoring.

Interest rates rise again
Last week we saw interest rates rise by 0.5% to 1.75% - the biggest rise in 27 years! It wasn’t however, entirely surprising given the level of inflation in the economy, and unprecedented levels being endured in the production economy.
📈 While consumer price inflation is sky high at 8.2% and set to continue soaring, it pales in comparison to producer price inflation which stands at an eye-watering 24%.
With so much inflationary pressure stacked in the supply side of the economy, there is a real concern that the Bank of England may well be impotent to curtail inflation’s rampage by discouraging consumer spending through base rate adjustments.
There is real concern that the Bank may be taking a peashooter to a gunfight - Make UK Senior Economist, James Brougham
But it is worth recognising that whilst interest rate rises are helpful in preventing inflation from becoming built-in to employers’ wage-setting procedures, the Bank of England can’t do anything about the other causes of the increasing cost of doing business.
⚠ The cost of doing business is something only Government policy can fix.
If the UK is to escape what is predicted to be a long, difficult recession, the Government needs to look at tax reductions on energy and other costs to help firms stay in business. Measures to boost growth must be the number one priority for the new Prime Minister from day one.
…With business confidence is taking a hit 
Covered in the FT, Senior Economist Fhaheen Khan explained that it’s becoming much harder to convince parent organisations and companies to be confident in investing in the UK - particularly those in capital intensive sub-sectors such as engineering and electronics.
Peter Foster
And @MakeUK_ chief economist Fhaheen Khan @FhaheenK expertly helps decode this weeks grim manufacturing PMIs 2/2 https://t.co/8Om3veHukn
So is manufacturing coming home?
It is evident that the seismic shocks of the last few years have created a potent cocktail of factors which has turned business models upside down. Now hit with spiralling inflation and energy costs, many companies will leave ‘just in time’ manufacturing behind and embrace ‘just in case.’
🏠 There are some signs that reshoring is now happening, with companies looking to shorten supply chains.
However, the trend is far from straightforward, and as we’ve previously said, there are concerns about higher production costs as well as the skills required to meet reshoring demand after decades of industrial decline and underinvestment.
Companies need to be confident they are maintaining the requirements for product quality, availability and cost with being close to their customers and suppliers- Make UK Director of Policy, Verity Davidge
Manufacturing’s coming home: UK fashion boss champions ‘reshoring’ | Manufacturing sector | The Guardian
What does this all mean for the rest of the year?
The remainder of the year looks challenging for manufacturers, with the big topics to address being:
  • stifling labour shortages;
  • persistent supply chain challenges;
  • on-going energy supply challenges; and
  • the rising cost of business.
💼 It is now clear whoever is the next Prime Minster will have little choice but to hold an emergency Budget- the issues facing not only individuals but businesses are simply too grave to avoid.
In other (better) news
We were delighted to host a Sector Showcase for UK Manufacturing as part of the Birmingham 2022 Commonwealth Games #UKHouse22, where we were joined by the Mayor for the West Midlands, Andy Street.
Make UK Campaigns
Great to host the Sector Showcase for UK Manufacturing as part of the Birmingham 2022 Commonwealth Games #UKHouse22.

As always our apprentices were pleased to make @andy4wm @WestMids_CA feel at home, especially with the Commonwealth inspired catering! https://t.co/6UKlqxYc1R
We 💚 policy and manufacturing, so let’s talk:
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Copy editor: Bhavina Bharkhada, Make UK Head of Policy & Campaigns
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Manufacturing Mondays
Manufacturing Mondays @MakeUKCampaigns

We discuss the big issues impacting the UK manufacturing sector, and our policy ideas to overcome them.

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