A gauge of the state of the private sector economy, the S&P Global’s composite Purchasing Managers’ Index (PMI) declined from 51.5 in March to 48.2 in April – the lowest reading since November 2022. The drop is consistent with a quarterly decline of 0.3% in GDP.
UK firms have been significantly impacted by tax rises which came into effect in April. Costs for businesses grew at the fastest pace since in more than two years, on account of the increases in minimum wage and employers’ national insurance contributions (NICs) set in the Autumn Budget. Brexit and the US trade tariffs further weakened prospects, with exports orders reportedly falling at the fastest pace since the early months of the COVID-19 pandemic in 2020.
“While recent months have been characterised by UK businesses treading water, broadly stagnating since last autumn’s budget, businesses are reporting more of a struggle to keep their heads above water in April. April’s fall in output was the largest recorded for nearly two and a half years, consistent with GDP declining at a quarterly rate of 0.3%, reflecting falling activity and demand across both manufacturing and services. Job cutting remains aggressive as business optimism about the year ahead sank to a two-and-a-half-year low, and one of the lowest levels yet recorded by the survey, even surpassing the low seen in the immediate aftermath of the Brexit vote in 2016.
“The disappointing survey reflects the impact of headwinds from both home and abroad. The biggest concern lies in a slump in exports amid weakened global demand and rising global trade worries, but higher staffing costs have also piled pressure on companies – linked to the National Insurance and minimum wage changes that came into effect at the start of the month. Just as export orders are falling at the sharpest rate since May 2020, during the pandemic lockdowns, firms’ costs spiked higher to a degree not seen for over two years,” explained S&P Global chief economist Chris Williamson.
S&P Global also said that total new work received by UK private sector firms decreased for the fifth month in a row as Trump’s tariffs has forced firms to delay spending decisions. S&P’s PMI raises red flags for the UK’s economic outlook and puts pressure on the Bank of England to cut interest rates in May.
Last week the Horticultural Trades Association, Fresh Produce Consortium and the British Potato Trade Association raised alarm bells for the horticulture industry, urgently calling on the Cabinet Office, Treasury and Defra to secure UK’s horticulture and fresh produce industries. The associations demanded immediate cross-governmental collaboration to secure the future of the UK’s horticulture and fresh produce industries because failure to act would not only risk undermining the UK’s food security, but also jeopardise the livelihoods of thousands of businesses.
