2nd Jan 2025 10:05
(Alliance News) - The UK manufacturing sector downturn deepened more sharply than expected last month, a survey on Thursday showed, with the fastest rate of decline since last January.
Survey respondents pointed to depressed market confidence and restructuring in response to upcoming increases to the minimum wage and employers' national insurance contributions.
The S&P Global UK manufacturing purchasing managers' index fell to an 11-month low of 47.0 in December, from 48.0 in November. The final reading was below the flash estimate of 47.3 points.
The reading remained below the neutral mark of 50.0, signalling deterioration in the sector for each of the past three months.
"A stalling domestic economy, weak export sales and concerns about future cost increases led to the steepest contraction of UK manufacturing production for almost a year in December," S&P Global said.
Total new business fell for the third consecutive month and at the fastest pace since October 2023. Overall export sales also fell at their fastest rate in ten months.
Business confidence fell to a two-year low, as manufacturers reported concerns about market confidence, inflation, rising costs from government legislation and future expectations of weaker economic growth.
The UK government budget announced at the end of October included a number of tax increases for companies.
"Manufacturers are facing an increasingly downbeat backdrop. Business sentiment is now at its lowest for two years, as the new government's rhetoric and announced policy changes dampen confidence and raise costs at UK factories and their clients alike. [Small to medium sized enterprises] are being especially hard hit during the latest downturn," S&P Global said.
Manufacturing employment fell for the second month, with the rate of job cuts reaching a ten-month high.
"The survey price gauges edged higher, reflecting rising transportation, labour and material costs, in some cases due to supply chain stresses pushing up global market prices. With costs expected to rise again in early-2025 as the announced budget changes come into actual effect, the Bank of England is likely to remain cautious about further interest rate cuts despite rising signs of economic difficulties," S&P Global said.
The survey features a panel of 650 manufacturers in the UK. Responses were collected in the second half of the month.
By Michael Hennessey, Alliance News reporter
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