The S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) fell to an 11-month low of 47.0 in December, down from 48.0 in November and below the earlier flash estimate of 47.3. The PMI remained below its neutral mark of 50.0—signalling deterioration.
This is the third month in a row that the PMI has remained below the 50.0 mark.
In addition, sterling fell on foreign exchange markets after the news broke - providing an even greater challenge to the Labour governments promises for economic improvements.
Rob Dobson, a director at S&P Global, said: “Manufacturers are facing an increasingly downbeat backdrop. Business sentiment is now at its lowest for two years, as the new government’s rhetoric and announced policy changes dampen confidence and raise costs at UK factories and their clients alike.”
Dobson said that SMEs were being hit the hardest as staffing levels were being cut back at their fastest since February.
Higher tax bills for businesses that were introduced in April by Chancellor Rachel Reeves and the increase in employers national insurance contributions to fund public services have also had a negative impact on businesses, Dobson said.
“Some companies are acting now to restructure operations in advance of the rises in employer national insurance and minimum wage levels in 2025,” Dobson said.
In response to Reeves' budget, businesses have called for Labour to refocus its plans for stronger workers rights.
The Confederation of British Industry said in December that the economy was “headed for the worst of all worlds”, projecting a “steep” decline in activity in the first quarter of this year.
Read more on the budget here: Autumn Budget 2024: Industry reactions
