The downturn facing UK manufacturers deepened in September, with production and new orders both contracting at faster rates, according to the latest S&P Global UK Manufacturing Purchasing Managers’ Index™ (PMI®).
The headline index fell to a five-month low of 46.2, down from 47.0 in August, and remained below the neutral 50.0 threshold for the twelfth consecutive month. Four of the PMI’s five components – output, new orders, employment and stocks of purchases – all pointed to worsening operating conditions.
Sharp contraction in production
Manufacturing output declined for the eleventh straight month, marking the steepest contraction since March. The downturn was broad-based, with consumer, intermediate and investment goods producers all reporting reduced activity. Firms attributed the fall to weaker domestic demand and subdued export orders, prompting scaled-back production runs.
Eurozone factory activity slips back into contraction
Eurozone factory conditions slipped back into contraction in September, with the HCOB Manufacturing PMI® falling from 50.7 to 49.8. The reversal followed August’s brief improvement and was largely driven by a renewed decline in new orders and a sharper pace of job cuts. Export weakness remained a drag, while production growth continued but slowed markedly from the previous month’s near three-and-a-half-year high.
The picture was mixed across the bloc: the Netherlands led expansion, joined by Greece, Spain and Ireland, while the region’s three largest economies – Germany, France and Italy – all contracted. Manufacturers also cut back sharply on purchasing and inventories, signalling caution as demand faltered. On prices, input costs and output charges both edged down, offering some relief after sustained inflationary pressures, though business confidence weakened to its lowest level since April.
New orders hit by weak confidence and export challenges
New business intakes dropped for the twelfth consecutive month, one of the sharpest declines in two years. Companies cited subdued client confidence, ongoing global trade uncertainty and higher energy and staffing costs as major headwinds. Reports also pointed to disruption in automotive supply chains following production shutdowns at Jaguar Land Rover.
Export demand weakened sharply, with overseas orders falling at one of the fastest rates in over two years. Respondents highlighted lower demand from key markets including the US, EU, Middle East and Asia.
Employment and capacity reductions
Faced with a challenging outlook, manufacturers cut jobs for the eleventh consecutive month. Reductions were seen across consumer, intermediate and investment goods industries, with employers citing the need to offset higher labour and energy costs. Cuts spanned full-time, part-time, temporary and agency staff.
Firms also trimmed input buying and inventories, though spare capacity was diverted to rebuild finished goods stocks, which rose for the first time since January.
Supply chain strains persist, price pressures ease
Supply chains remained under pressure, with average vendor lead times lengthening for the twenty-first straight month due to shipping delays, port congestion, supplier bottlenecks and material shortages.
On the cost side, price pressures eased. Both input cost and output charge inflation slowed to nine-month lows, with softer purchase price inflation reported across consumer, intermediate and investment goods sectors.
Cautious outlook
While some manufacturers expressed optimism, citing lean inventories, potential new product launches and hopes for market recovery, overall confidence remained muted. Concerns around government policy, fragile client confidence and global trade uncertainty weighed on sentiment for the year ahead.
‘Worrying news’ for the sector
Commenting on the latest UK Manufacturign PMI figures, Rob Dobson, Director at S&P Global Market Intelligence, said: “The final Manufacturing PMI results provide further worrying news for the health of UK industry. Manufacturers are facing an increasingly challenging environment, with intakes of new business and levels of production hit by weak market sentiment, a dearth of new export work and a high-cost environment exacerbated by tax and labour cost rises. Companies entwined into the autos supply chain are also facing a temporary hit to activity following the cyber-attack on JLR.
“The current tough operating environment is also seeping through to business confidence and leading to an increased focus on cost cutting. Confidence about the next 12 months remains at a relatively subdued level, job losses have been recorded in each of the past 11 months, and a further cut in purchasing activity is symptomatic of a focus on trimming non-essential spending.
“There is some better news, however, as a number of firms noted that lean inventories, combined with hopes that market and globe trade uncertainties could subside, may boost production volumes. There are also signs that, while costs are still high overall, the pace at which they are increasing is slowing. This could provide some wiggle room for interest rate cuts to support growth and also help offset any higher taxes announced in November’s Budget.”
Dan Farrell, Accenture’s Manufacturing & Engineering Lead, Industry X, in the UK, said: “A further contraction in UK manufacturing activity to a five-month low underlines the sector’s ongoing fragility. Persistent declines in output and new orders confirm the difficulty manufacturers face and point to growing headwinds as the year closes. Amidst this backdrop, the November Budget takes on added significance. Clarity on fiscal policy will be key to determining how confident manufacturers feel about regaining momentum.
“While costs are squeezed, the sector should focus on the long-term by investing in new technology, including cyber, AI and advanced data capabilities. With macro uncertainty persisting, modernisation has never been so important to help navigate volatility, build resilience and move onto a more sustainable growth path.”
Victoria Horishny, manufacturing specialist at advisory firm Interpath, said:“Persistent weakness in the UK manufacturing sector has dragged confidence for more than a year below the PMI’s 50-threshold. Boardrooms have repeatedly demonstrated resilience in the face of input cost inflation, subdued demand, and the uncertainty stirred by tariffs and geopolitical tensions. However, the current disruption rippling through the automotive supply chain, compounded by the looming threat of further tax increases in the upcoming Budget, may prove a tipping point for some businesses and will likely exert further downward pressure on the index in the months ahead.
“These figures should serve as a wake-up call to accelerate delivery of the Government’s long-term Industrial Strategy. It will require sustained effort, targeted investment, and a clear and tailored commitment to specific sectors such advanced manufacturing and clean energy. The index’s performance shows that we must rebuild industrial resilience and reposition UK manufacturing for future growth.”
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