Manufacturing momentum holds amid easing global tensions and domestic uncertainty
Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which has remained resilient at 52.5 in June, from 53.9 in May, Mike Thornton, Head of Industrials at RSM UK, said: “UK manufacturers continue to show resilience. Strong demand and front-loaded orders have maintained a strong start to the year, but there are early signs that momentum is softening with new orders and hiring both easing this month. The good news is that confidence in future output remains strong, suggesting any slowdown could be short-lived.
“If the peace accord holds then any inflationary pressure working its way through supply chains since the conflict in Iran started will begin to ease. The reopening of the Strait of Hormuz will support global trade flows, improve the movement of materials and help bring energy costs back down.
“However, the effects of recent disruption are still likely to feed through in the coming months, meaning the current expansion story should be viewed with a degree of caution. While global tensions may be easing, domestic political uncertainty could create fresh challenges for businesses. As a result, the outlook for UK manufacturing in 2026 appears more complex than the headline figures suggest.”
Thomas Pugh, chief economist at RSM UK, said: “The output balance of the PMI climbing to a 21-month high suggests that firms continued to try to front-run potential price increases in June which is continuing to boost activity. That said, this momentum can’t last forever, and the new orders balance dropped to the lowest since December 2025, which could suggest that activity will fall back sharply over the summer.
“In any case, the drop in the input price balance should provide some relief to firms. That said, both the input and output price balances remain elevated, which suggests there is enough inflation in the pipeline already that core goods inflation is still likely to pick up towards the end of the year. Fortunately, the input and output price balances should continue to ease, as seen by the downwards revision between the flash and final PMI, as oil prices are now back at pre-war levels which should mean any pickup in inflation is brief.
The improved outlook for inflation lowers the risk of the Bank hiking later this year. This, combined with the unwinding of front-running and persistent political uncertainty which will weigh on activity means we continue to expect the Bank of England to remain on hold before resuming cuts in 2027.”