UK manufacturing maintained its recovery in July, with production and new orders gathering pace even as the headline Purchasing Managers’ Index (PMI) eased slightly from June.
The latest S&P Global UK Manufacturing PMI registered 51.9 in July, down from 52.5 in June and a four-month low. However, the reading remained above the neutral 50.0 mark for a ninth consecutive month, signalling that the sector continues to expand.
The modest decline in the headline figure masked strengthening underlying demand. Manufacturing output rose for a fourth straight month, with the pace of growth accelerating to its fastest level in almost two years, supported by stronger inflows of both domestic and export orders.
New business increased for an eighth consecutive month, while export orders rose for the seventh month running. Manufacturers reported stronger demand from markets including North America, the European Union, mainland China, India and South Korea.
The survey also pointed to easing cost pressures. Input price inflation slowed to a five-month low as supply chain disruption continued to ease, while output price inflation also moderated. Supplier delivery delays, although still lengthening, increased at their slowest pace since February as material availability improved.
Employment growth, however, almost stalled. Staffing levels rose for a fourth successive month, but only marginally, as manufacturers balanced stronger workloads against ongoing uncertainty over the economic outlook, tax policy and geopolitical risks. Encouragingly, backlogs of work increased for the first time since April 2022, suggesting hiring could strengthen if demand remains resilient.
Rob Dobson, director at S&P Global Market Intelligence, said the July figures offered further encouragement for UK manufacturing.
“July brought further encouragement for the UK manufacturing sector, as rates of growth in output, new orders and new export business all accelerated. The increase in production was the fastest in almost two years, as improving market conditions led to better hit rates in securing new contracts.”
He added that easing supply chain pressures had helped slow input cost inflation, while caution remained over developments in the Middle East and wider geopolitical tensions that could affect supply and prices in the months ahead.
UK keeps pace with eurozone recovery
The UK’s performance broadly mirrored that of the eurozone, where the headline manufacturing PMI also reached 51.9 in July, rising from 51.4 in June to its highest level for three months. However, while both regions posted identical PMI readings, the drivers behind the recovery differed.
Across the eurozone, manufacturing output expanded at its fastest pace since March 2022, but much of the increase was supported by companies working through existing backlogs rather than a sustained improvement in demand. New orders rose only marginally, export demand remained weak and manufacturers continued reducing employment and inventories. Germany led the recovery among the bloc’s largest economies, while France and Spain remained broadly stagnant.
By contrast, the UK’s expansion appeared to be driven by stronger underlying demand, with both domestic and export orders accelerating alongside production. Although business confidence remained subdued, the survey suggested improving market conditions were translating into new contract wins rather than relying primarily on clearing existing workloads.
Looking ahead, business optimism in the UK slipped to a three-month low despite the stronger activity data. Manufacturers cited hopes of improved market conditions, new product launches and a more favourable global economic environment over the coming year, but continued to highlight concerns around trade tensions, taxation and regulatory changes.
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