Tariff uncertainty hits UK manufacturing as activity falls to 18-month low

Commenting on the latest which has decreased to 44.9 from 46.9, Mike Thornton, Head of Industrials at 91̽»¨, said: “The headline PMI hit its lowest level since September 2023 falling to 44.9 in March – demonstrating the clearest signal that tariff uncertainty and trade wars are hampering manufacturing activity in the UK. 

“Future output, new orders and new export orders all took a sharp decline in March highlighting that the uncertainty swirling around potential tariffs from the US or retaliatory action has led business to hit pause on purchases. It is hoped that this is temporary, and that confidence will start to improve later in the year, but this slowdown continues to negatively impact production, people and investment.”

He added: “Goods are at the heart of the current trade wars so we could see more UK businesses reshoring production and bringing its supply chain closer to home to protect against instability and geo-political turbulence. When you combine this with an uptick in defence spending then we could see an industrial driven boost to the UK’s economic future; but it will take time. 

“In a world of uncertainty, what is needed, more than ever, is the long-awaited industrial strategy to provide clarity to the UK market, and globally, to ensure industry can, not only recover, but forge ahead to maximise future opportunities.” 

Tom Pugh, Economist at 91̽»¨, said: “March marks the sixth consecutive month of sub-50 readings for the manufacturing PMI as the sector continues to be hammered by trade uncertainty.

“Tomorrow, the US administration are expected to announce if they will impose reciprocal tariffs on the UK. Either way, the manufacturing sector will either face significant tariffs now or continued uncertainty over the coming months, both would weigh heavily on the sector.

“Even if the UK avoids direct tariffs, the sector could still suffer if tariffs are put on key trading partners, such as the EU, prompting a slowdown in global demand.

“Unfortunately, the bad news doesn’t look to be fading. The future output index ticked down to 65.0 That is the lowest level since November 2022, when inflation was over 10% and companies were dealing with the fallout of the mini-budget. On the upside, a big increase in European defence spending should help demand recover, but that will take time to materialise.”