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The US has fallen out of the top three growth markets for UK manufacturers for the first time in nearly four decades, according to an industry survey that highlights the impact of higher tariffs.
In May, just 18 per cent of British manufacturers expected “positive demand conditions” in the US over the next three months, less than 56 per cent for Europe, 23 per cent for the Middle East and 20 per cent for Asia, according to a quarterly survey by manufacturers association Make UK.
“This is the first time the US has not been the second-most favoured destination for export growth for UK manufacturers, behind the EU,” said Make UK, which started the survey in 1988.
The figures come after official trade data showed UK exports of goods to the US falling by £2bn in April, the largest monthly decrease since records began in 1997. It follows four months of consecutive increases, suggesting businesses anticipated exports to beat incoming tariffs.
Seamus Nevin, chief economist at Make UK, said: “Manufacturers are facing a gathering storm of huge uncertainty in one of their major markets.”
The Make UK/BDO survey of 324 companies was carried out between April 30 and May 22. This includes the period of the announcement of a trade agreement between the UK and the US on May 9, which cut punitive tariffs on car and steel exports but left a flat 10 per cent levy that applies to most goods.
Last week, officials said they were close to signing off on crucial parts of the deal that will deliver lower tariffs for British car exports to the US in return for improved access to the UK for American beef and ethanol producers.
Make UK also renewed its call on the government to take “bold measures” in its forthcoming industrial strategy to bring down the high cost of energy.
Manufacturing orders were less negative than in the previous quarter, according to the latest survey. The index tracking orders rose to minus 2 from minus 6 in the previous quarter. The index is based on the proportion of businesses reporting expansions or contractions. The index tracking output rose to 9 from minus 1 over the same period.
Despite increased employer national insurance contributions and the national living wage, headcount expectations were marginally positive in the second quarter. However, the companies surveyed said their investment intentions for the year ahead were lower, with the difference in the proportion of businesses expecting expansion and contraction falling to 2 from 5 in the previous quarter and 10 at the end of 2024.
Richard Austin, head of manufacturing at BDO, said: “This quarter’s results are a testament to the increasingly challenging landscape our British manufacturers are operating in.”
He noted some “pockets of positivity”, but added that businesses “need urgent clarity and targeted investment from the government if this recovery is to continue into next quarter”.