UK Manufacturing PMI Improves Slightly, Remains in Contraction Range

British factory output continued its downward trend in January, as indicated by the latest S&P Global UK manufacturing Purchasing Managers' Index (PMI) survey. The PMI recorded a reading of 48.3 in January, a slight increase from 47 in December, but still well below the 50 threshold that separates growth from contraction.

The survey highlights that new orders and employment figures continue to decline, with the most severe impact being felt by small factories in the UK. This downturn is attributed to the weak economic outlook, which poses significant challenges to manufacturers.

Additional pressures arise from rising input costs and tax increases stemming from the October budget. While large companies showed recovery signs with improvements in output and new orders in January, smaller firms are struggling.

Furthermore, business optimism remains close to its two-year low, and input price inflation has surged to its highest level in two years. The economic landscape is further complicated by pending increases in the minimum wage and employer national insurance contributions expected to impact businesses from April onwards.

The combination of these factors paints a challenging picture for the UK manufacturing sector, with external pressures and internal economic conditions contributing to the ongoing decline in activity.