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Production drops 0.6% in May

ended 13. July 2023

Production output fell by 0.6% in May 2023 after a fall of 0.2% in April 2023, revised up from a fall of 0.3% in the previous publication, according to the latest GDP data published this morning; this sector was the main contributor to the fall in monthly GDP in May. Any thoughts, send them across ASAP.

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
With the central bank set on inducing a recession, and it taking months to see the effect of interest rate rises, these figures are expected but there’s worse to come. The governor has stated that 2 million homeowners will be paying £500 per month more on their mortgage by 2025 and these have been largely unaffected by the rate increases so far as they are on fixed rates. The policy is bemusing by the Bank of England and if they persist, GDP data for the second half of 2023 will be significantly worse. The figures, today, are the results of rate rises from the start of the year and the evaporating of confidence from the consumer.
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Sam Kirk
Managing Director at J-Flex Rubber Products
With interest rates and inflation on the rise, it probably doesn't come as a major surprise that production output continues to fall. That may not be the only contributing factor, though. In this post-Covid and post-Brexit world, the decision-making process has become significantly longer as businesses introduce even more stringent purchasing controls. With many sectors taking a hammering over the past few years, cash flow and/or access to finance may also be a stumbling block to growth or investment for some, whilst recruitment and skills shortages continue to be a challenge for many SMEs. This alone will undoubtedly have had an impact on production output. The march of the makers has lost a lot of pace in the current economic climate.
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Lucinda O'Reilly
Director at The International Trade Consultancy
For manufacturers, the best way to increase productivity is through investment in automation and technology to improve efficiencies and reduce costs. Investment requires a stable economic environment and the confidence that you will be in business long enough to see the return on the investment. The terms of the Trade and Cooperation Agreement with the EU were finalised at the very last minute so businesses wasted huge amounts of time and resource planning for scenarios that never happened. One of our most innovative sectors - medtech is being strangled by the requirement to get their products certified in the EU as well as the UK. We have no government strategy for or investment in semiconductors. In fact, the government ditched the Industrial Strategy they had in 2021, there is now recognition that we need one but how long will it take for them to agree it? It's a miracle productivity has only dropped by 0.6%.