UK Manufacturing Hit by Sharpest Input Price Surge in Over Three Decades
The UK manufacturing sector has experienced its most significant monthly increase in input prices for more than thirty years, as the ongoing conflict in Iran severely disrupts global supply chains. According to the closely monitored S&P Global UK manufacturing purchasing managers' index (PMI) survey, the input price inflation index surged by 15 points between February and March 2026. This represents the largest monthly jump since September 1992, when the UK withdrew from the European Exchange Mechanism on the infamous Black Wednesday.
Production Contracts and Delivery Delays Worsen
The survey further indicated that manufacturing production contracted for the first time in six months during March. Overall activity declined, with the PMI recording a reading of 51, down from 51.7 in February and below the earlier flash estimate of 51.4. Any figure above 50 signifies growth, while below indicates contraction. The Iran war has exacerbated delivery delays, with ships forced to reroute around the blocked Strait of Hormuz, a critical shipping artery. Average vendor delivery times lengthened at the fastest rate in over four and a half years.
Rob Dobson, director at S&P Global Market Intelligence, commented: "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."
Widespread Price Increases and Job Cuts
Nearly half of the companies surveyed, 49%, reported an increase in purchase prices in March, with only 2% seeing a decrease. The sector also faced job losses, with the latest round of cuts being the steepest since September 2025. However, there was a slight positive note as new orders rose for the fourth consecutive month, albeit at a slower pace than in February, suggesting underlying demand remains somewhat resilient.
Dobson added: "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."
Business Responses to Mounting Pressures
A separate report from Barclays revealed that businesses are already taking measures to counteract the trading and cost pressures stemming from the Iran conflict. Their business prosperity index showed that 43% of firms are experiencing profitability hits due to increased shipping and logistics costs. In response:
- 37% are reducing energy use or enhancing supply chain efficiency.
- 32% have adjusted their pricing to offset rising costs.
- 34% of the 500 business leaders polled plan to pass higher costs onto consumers.
- 29% are cutting non-essential spending or broader operational costs.
Mike Thornton, head of industrials at RSM UK, warned: "The control of the Strait of Hormuz is one of the biggest commercial issues for manufacturers and issues will pile up the longer access is blocked. The increase in energy costs will be a persistent headwind, but worries relating to supply chain disruption are growing."
The combined data paints a challenging picture for UK manufacturers, grappling with unprecedented input price inflation, supply chain bottlenecks, and production declines, all intensified by the geopolitical turmoil in the Middle East.
