Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which has decreased to 51.0 in March, from 51.7 in February, Mike Thornton, Head of Industrials at RSM UK, said:

“Manufacturers have shown surprising resilience in March, with the headline PMI figures remaining relatively flat with a small decrease at 51.0. However, this resilience masks the acute impact the ongoing geopolitical tensions are already having on input prices that has led to the biggest month-on-month jump since the aftermath of Black Wednesday in October 1992.

“Furthermore, demand is being squeezed - new orders have ticked down, leaving the sector feeling pinched – the positive momentum we have seen over the past few months has hit the buffers.

“The control of the Straight 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.

He added: “The UK’s energy imbalance remains a critical issue and serves to amplify volatile oil and gas prices. However, regaining control of our own energy production will come at a cost and raising capital to invest could be tricky as borrowing becomes more expensive and demand slows.”

Thomas Pugh, Chief Economist at RSM UK, said: “The resilience of the headline manufacturing PMI in March was impressive but this masks a more troubling underlying picture. Even if the conflict in Iran is entering its closing phases, as recent announcements from the White House suggest, the damage to energy infrastructure and dislocation in energy markets means the global economy will still be hit this year. Higher inflation and weaker economic growth are inevitable. For the manufacturing sector, that will raise operating costs and dampen export orders, squeezing margins.”

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