UK Manufacturers Hit by Sharpest Cost Inflation Rise Since 1992

The UK's manufacturing sector has been hit by the sharpest rise in cost inflation since Black Wednesday in 1992, as the conflict in the Middle East drives up oil prices and disrupts supply chains. According to the Purchasing Managers' Index (PMI), cost inflation in manufacturing jumped to its highest level since October 2022, marking the largest month-on-month change since 1992.

The rapid increases in costs mainly relate to fuel, transportation, and energy-intensive raw materials. The composite PMI index, covering services and manufacturing, stood at 51, suggesting the economy is still expanding, but at a sharply slower pace than the 53.7 seen in February.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "Output growth across manufacturing and services has slowed to a crawl as companies blamed lost business directly on the events in the Middle East, whether through heightened risk aversion among customers, surging price pressures, higher interest rates, or via travel and supply chain disruptions."

The CBI's survey of the retail sector also showed the fastest annual decline in sales volumes since April 2020, with the balance of retailers reporting rising sales at -52% in March, down from -43% in February.

Martin Sartorius, lead economist at the CBI, said: "Retailers report that weak economic conditions continue to weigh on household spending, with subdued activity also evident across the broader distribution sector."

Emily Sawicz, a director and industrials senior analyst at RSM UK, said: "Despite some resilience, geopolitical tensions remain a key concern for UK manufacturers – underscoring that conditions remain highly uncertain. The recovery many hoped to see take hold in 2026 now appears likely to be delayed at best, as rising energy costs and persistent inflation risks threaten to slow momentum."