Sentiment in the UK manufacturing sector declined sharply in April 2025, with the index compiled by the Confederation of British Industry (CBI) falling to -33, marking a further deterioration from the already pessimistic reading of -47 in the previous quarter. This represents the fourth consecutive quarter of negative sentiment, underlining the ongoing challenges facing the sector.
UK business optimism continues to fall
The persistent weakness is reflective of broader economic headwinds, including sluggish domestic demand, higher input costs, and uncertain global trade conditions.
Manufacturing output continued its downward trajectory, registering a decline of -2 compared to -18 in January, signaling that the contraction has slowed slightly but remains entrenched. Surveyed firms indicated a bleak outlook for the coming months, with production levels expected to continue their downward trend (-5) as the sector struggles to regain momentum. Despite some signs of stabilization in the pace of decline, the longer-term outlook remains fragile, with no immediate turnaround in sight.
New orders, a key indicator of future production, remained deeply negative at -13, an improvement from -20 in the previous period but still reflecting weak demand. The slowdown in new orders is being driven by both domestic and international factors. On the domestic front, orders were down -11, although this was an improvement from the -23 recorded in the previous quarter, suggesting that some domestic demand conditions may be stabilizing. However, external demand painted an even bleaker picture, with orders from foreign markets falling sharply by -4, a significant recovery from the previous -33, but still indicating considerable weakness in global demand for UK-manufactured goods.
Firms continued to cut jobs
As a result of these ongoing challenges, firms in the sector have continued to cut jobs. The rate of job shedding worsened, with employment dropping by -16 compared to -8 in the previous quarter, underscoring the ongoing strain on businesses to manage rising operational costs while facing declining revenues. This trend highlights the difficulty manufacturers face in navigating the current economic environment, with many opting for labor reductions in a bid to cut costs and stay afloat.
On the price front, input costs continued to accelerate, rising to 48 from 43 in the previous quarter. This increase reflects persistent inflationary pressures on raw materials and energy costs, which have been exacerbated by supply chain disruptions and higher labor costs. Manufacturers are bracing for further price increases in the coming months, with expectations that input costs will continue to rise through July, with a forecasted reading of 53. This inflationary environment presents additional challenges for manufacturers, as higher costs further squeeze margins and complicate pricing strategies.
Overall, the UK manufacturing sector remains mired in a challenging economic environment, with continued contraction in production, weak order books, and rising costs. Unless there is a significant shift in domestic demand or a resolution of global trade uncertainties, the outlook for the sector is likely to remain negative, with firms facing a protracted period of difficulty.
