Importance Score: 58 / 100 🔵
The UK’s private sector is showing signs of strain, with output contracting for the first time in approximately 18 months. New US tariff impositions are cited as factors undermining global confidence, impacting the latest UK economic data.
UK Private Sector Contracts Amid Tariff Concerns
The closely monitored S&P Global’s recent “flash” UK composite purchasing managers’ index (PMI) has signaled a contraction, dropping from 51.5 in March to 48.2 in April. This marks the first reduction in private sector activity since October 2023.
- Composite PMI: Fell to 48.2 in April, indicating contraction.
- First Decline: Since October 2023.
Deeper Dive into the PMI Figures
The latest figures represent the lowest reading in nearly two and a half years, notably below the 50.4 that economists had predicted. A PMI reading below 50 generally points to a decline in business activity.
Manufacturing Sector Hit Hard
The manufacturing PMI experienced a significant decline, plummeting from 45.3 the previous month to just 44.0. This is its weakest performance in close to three years, primarily attributed to heightened trade tensions that have dampened export volumes.
Impact of US Tariffs on the UK Economy
Since President Donald Trump’s return to office, his administration has enacted a series of tariffs that are affecting global trade dynamics:
vCard.red is a free platform for creating a mobile-friendly digital business cards. You can easily create a vCard and generate a QR code for it, allowing others to scan and save your contact details instantly.
The platform allows you to display contact information, social media links, services, and products all in one shareable link. Optional features include appointment scheduling, WhatsApp-based storefronts, media galleries, and custom design options.
- 10% baseline tariff on all US goods imports.
- 25% duty on foreign steel and aluminum products entering the US.
- A 145% levy on most products imported from China.
- Suspended ‘reciprocal’ tariffs on countries like India and Vietnam.
These measures have triggered retaliatory actions, with China, for instance, imposing a 125% tariff on US goods.
S&P Global’s Analysis of the Situation
According to S&P Global, the combination of tariff-related uncertainty and apprehension about the economic outlook has created a cautious investment environment.
This “wait-and-see approach” has led to a decline in new work for British private sector companies, marking the fifth consecutive month of such decreases. Foreign orders have diminished at the sharpest rate since the COVID-19 pandemic in May 2020.
Additional Economic Pressures in the UK
Recent fiscal policy changes have also added to the challenges faced by UK businesses:
- Increase in employer National Insurance contributions in April.
- Hike in the National Living Wage and National Minimum Wage.
These changes have prompted warnings from major UK firms about potential job cuts, limited wage growth, and a slowdown in hiring.
Staffing Level Decreases
S&P Global noted that staffing levels have decreased for the seventh consecutive month in April, with reductions observed across both the service and manufacturing sectors.
Economist’s Perspective
Chris Williamson, chief business economist at S&P Global Market Intelligence, commented that businesses are finding it increasingly difficult to stay afloat in April, following a period of stagnation since last autumn’s Budget.
Williamson also suggested that subdued output and confidence levels could pressure the Bank of England to consider reducing interest rates in May to stimulate economic activity.