We’re still operating in a challenging economy, but there are a few signs that the dial is moving in the right direction. A recent record budget surplus and inflation falling to around 3% is clearly welcome news for the Government, and for many households it helped ease pressure at the petrol pump and in the weekly shop.
But for manufacturing, the picture remains more complicated. Inflation might be cooling in the consumer economy, yet the underlying cost base for businesses like ours is still moving in the wrong direction.
And in recent days, that uncertainty has only deepened. The conflict involving Iran has added a fresh layer of volatility to global energy markets, with oil prices rising sharply and renewed concern about what that could mean for businesses and households in the months ahead. The Government has already indicated it is considering whether action may be needed to shield consumers from higher energy costs, which underlines just how serious the situation could become if prices remain elevated.
Rent, rates, energy and wages continue to rise, and those pressures don’t disappear just because a top-line inflation figure comes down. Across our sector, and across UK manufacturing more broadly, everyone is talking about the same thing: how do we keep investing, keep improving, and keep delivering value for customers while operating in a high-cost environment?
At Nicklin, we’ve been working hard to mitigate those rising costs in a way that doesn’t compromise quality, service or our long-term resilience. Energy is a good example. We continue to invest in sustainable alternatives, including our biomass operation, and we’re actively exploring further options such as solar PV and battery storage.
We’re also looking at practical efficiency measures that make a real difference day to day, including the replacement of 160 skylights to increase daylight on the factory floor and reduce our overall energy requirement. None of these steps is a silver bullet on its own, but together they help us reduce exposure, improve efficiency and keep moving forward.
That is why any targeted support from Government on energy costs would be welcome, particularly if it recognises the pressures faced by energy-intensive and cost-sensitive sectors such as manufacturing.
Businesses can adapt, and they do, but in periods of acute volatility it is important that government support is directed where it can make the biggest difference to resilience, competitiveness and investment. Recent business groups have made that case clearly, calling for meaningful support to help firms manage energy costs while continuing to invest for the future.
Wages are another area where the pressure is real. The increase in the minimum wage is a challenge for many manufacturers. At the same time, we’ve always believed in paying fairly and ensuring our team can earn a living wage.
Investing in people isn’t optional if you want a business that performs consistently, adapts to change and keeps improving. That’s why we continue to support development across the company, with more than 20 colleagues currently enrolled on ILM (Institute of Leadership & Management) courses. Building skills, confidence and leadership capability strengthens the whole operation, and it’s an investment that pays back in performance and retention.
That’s also why the business rates revaluation is such a blow. For manufacturers, it can feel like cost is being layered on cost at a time when the economy remains uncertain and competitiveness really matters.
Other sectors, such as retail and leisure, have seen some relief from the Government, but for manufacturing there has been no equivalent support. It’s difficult to square that with the wider ambition of growing the UK’s industrial base. The Government needs to rethink the business rates system for manufacturers, especially while so many other costs to business are rising at the same time.
Despite the headwinds, there are small reasons for cautious optimism. Recent Purchasing Managers’ Index figures suggest manufacturing activity is expanding at its fastest rate in 17 months, which is encouraging. And while the timber sector remains relatively flat overall, there is still a sense that demand and pricing can improve as confidence returns – particularly because timber remains one of the most flexible, dependable and sustainable materials available, whether in packaging, construction or wider supply chains.
In an environment like this, the most important thing any business can do is stay at the top of its game. For us, that means continuous improvement across the operation: investing on the shopfloor to respond to customer demand and new opportunities; exploring technology that helps our teams be more productive; and staying committed to our sustainability goals.
That includes further investment in a more modern transport fleet, power quality and monitoring, additional automation and becoming a carbon neutral business. These are the kinds of decisions that keep a business fit for the future, not just for the next quarter, but for the years ahead.
