UK manufacturing production fell back into contraction at the end of the opening quarter, as rising uncertainty surrounding geopolitical tensions, the war in the Middle East and direction of domestic economic policy led to a scaling back of output volumes.
March also saw a steep rise in input price inflation and a marked increase in supply-chain stress.
The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) posted 51.0 in March, down from 51.7 in February and below the flash estimate of 51.4. The PMI has remained above the neutral 50.0 mark for five successive months.
Two of the PMI sub-components - new orders and suppliers' delivery times - were at levels normally consistent with an improvement in operating conditions. That said, longer lead times in March were mainly the result of increased supply- chain stress resulting from the Middle East conflict as opposed to order books driving greater demand for suppliers' services.
Production, employment and stocks of purchases all contracted.
Manufacturing output decreased for the first time in six months, as a solid contraction in the intermediate goods industry more than offset mild (but slower) expansions at consumer and investment goods producers.
The scaling back of production volumes was linked to rising uncertainty, war in the Middle East, stock management initiatives and lower levels of confidence about the year ahead at manufacturers and their clients alike.
Business optimism regarding the outlook for production volumes dropped to its lowest level September 2025.
Moreover, the fall in the Future Output Index since February (5.6 points) was the steepest one-month decline in a year. Rising geopolitical tensions, the war in the Middle East, ongoing uncertainty about domestic government policy and fears about rising price pressures and supply-chain insecurities all weighed on business confidence.
The outbreak of war in the Middle East and closure of the strait of Hormuz had a marked impact on supply chains and purchasing costs during March. Average vendor delivery times lengthened to the greatest extent in over four-and-a-half years, with a quarter of panellists reporting an increase in lead times compared to only 2% reporting a decline. A number of firms noted that recent events were exacerbating existing strains on supply chains (for example the Red Sea crisis and post disruptions).
Rob Dobson, Director at S&P Global Market Intelligence “UK manufacturing output contracted for the first time in six months in March, as the war in the Middle East and ongoing concerns about domestic economic policy led to a scaling back of production.
"The impact of the war also caused noticeable shifts in the cost and supply chain backdrops. Delivery times lengthened to the greatest extent since mid-2022, while the acceleration in input price inflation was the steepest since the aftermath of the UK's withdrawal from the ERM in 1992. The resulting high-cost environment and shortages of inputs were also factors stymieing
production volumes.
“The darker economic and geopolitical backdrop is also weighing on business confidence and hiring trends. Optimism about the year ahead has slumped to a six-month low and the latest round of job cuts is the deepest since last September.
“The one possible positive is that, despite rising at a slower rate, the trend in new order inflows held up better than production. This suggests that the drop in production is currently more of a supply issue than one caused by an outright downturn in demand, though it’s hard to see how demand can prove resilient in the face of current high energy prices and economic uncertainty unless there’s a swift resolution to the war in the Middle East.”
