The SSP Global UK manufacturing PMI survey recorded a reading of 46.9 in February, from 48.3 in January, with a reading above 50 indicating that activity is growing
The UK manufacturing sector saw its sharpest drop in jobs since 2020 last month, as soaring taxes and inflation ramped up factory costs and production plummeted to a 14-month nadir, amid concerns over trade tariffs.
The closely monitored S&P Global UK manufacturing PMI survey revealed a dip to 46.9 in February from January’s 48.3. A figure above 50 signals growth, while below indicates contraction, and the index has been under 50 for five straight months now.
Manufacturers have been particularly hit by tax hikes announced in the October Budget, with company leaders pointing to these increases as a key factor in escalating expenses. Chancellor Rachel Reeves’ decision to hike company national insurance contributions to fund public service enhancements is one such burden.
With these changes, alongside a rise in the minimum wage set for April, factories are cutting jobs, reducing working hours, and not replacing staff who leave.
Rob Dobson, director at S&P Global Market Intelligence, commented that these cost surges are “driving up inflation fears and intensifying the downward trend in staff headcounts”. On top of this, manufacturers are grappling with weak demand, dwindling orders, waning customer confidence, and persistent supply chain troubles both at home and abroad.
Despite the gloomy outlook, business optimism reached a six-month peak in February, buoyed by investment spending and the hope that economic conditions will improve.
Tom Pugh, an economist at consultancy firm RSM, has voiced his concerns over the current economic climate. He stated: “A combination of weak growth in our major trading partners such as France and Germany, combined with uncertainty around US tariffs, and therefore a potential global trade war, continues to weigh heavily on manufacturing firms.”
He further highlighted the impact on exports, saying it’s “clearly hampering the manufacturing sector, and given the likelihood of further tariffs and trade disruption, it doesn’t look like this will improve any time soon”.
However, he did offer a glimmer of hope for the domestic economy, adding: “The good news is that the domestic economy should recover through this year, helping to support some increase in activity.”
