The UK manufacturing sector continued its downturn in March, falling to a 17-month low of 44.9. Business optimism is now at its weakest level since November 2022 due to steeper drops in output, new orders and new export business.
The end of the opening quarter saw the downturn at UK manufacturers deepen. Rates of contraction in output and new orders accelerated, as the difficult operating environment persisted. Business confidence slumped to a near two-and a-half year low, as concerns about government policy, rising costs, increased geopolitical tensions and potential tariff uncertainty impacted on both current and expected future conditions.
The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) fell to a 17-month low of 44.9 in March, down from 46.9 in February but slightly above the earlier flash estimate of 44.6. The PMI has now signalled a deterioration in overall operating conditions in each of the past six months.
March saw UK manufacturing production decline for the fifth straight month and at the quickest pace since October 2023. The downturn was widespread, with contractions signalled across all sub-sector definitions (consumer, intermediate and investment goods) and all size categories (small, medium and large). Small-scale producers saw the steepest decrease in output.
By far the most significant factor underlying the retrenchment in production volumes was a slump in the level of new business received during March. New order intakes fell to the greatest extent for over one-and-a-half years (since August 2023) and at one of the quickest rates since the pandemic and lockdown affected months of 2020. The 6.9-point drop in the New Orders Index since February was also the joint-sharpest fall since 2020, further emphasising the severity of the acceleration in the pace of decline.
Eurozone showing meaningful recovery
The HCOB Eurozone Manufacturing PMI rose to 48.6 in March from 47.6 in February, reaching a 26-month high, while the Manufacturing PMI Output Index climbed to 50.5 from 48.9, marking a 34-month high. These figures indicate signs of recovery, with production levels increasing for the first time since March 2023.
The expansion was the fastest in almost three years, but only marginal overall and trailing the historical average. Greater production volumes were achieved despite a further (albeit slower) decline in new orders. Employment, purchasing activity and inventories all continued to decrease, while there was a slight drop in business confidence.
Commenting on the latest UK Manufacturing PMI figures, Rob Dobson, Director at S&P Global Market Intelligence, said: “March proved to be another tough month for UK manufacturers. Output contracted at the quickest pace since October 2023, as new business growth fell at the steepest rate for one-and-a-half years, suffering one of its sharpest falls since the pandemic lockdown of 2020.
“Companies are being hit on several fronts. Many reported that domestic market conditions are deteriorating, costs are rising due to changes in the national minimum wage and national insurance contributions, geopolitical tensions are intensifying, and global trade faces potential disruptions from tariffs.
“Although the impact on production volumes was widespread across industry, it was again small manufacturers that took the hardest knock.
“The outlook is also darkening, with overall business optimism plunging to its lowest levels since late-2022. Fears about current and future performance put manufacturers on an increasingly cost cautious footing, with employment, stock holdings and purchasing all falling as companies looked to work leaner and protect cash flow, margins and competitiveness. Many firms are clearly hunkering down as they expect difficulties to continue in the coming months.”
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