The latest seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to 53.9 in May from 53.7 in April, reaching its highest level in four years. The index has now remained above the 50-point threshold that separates growth from contraction for seven consecutive months.
Manufacturing output increased for a second month, driven primarily by growth in the intermediate and investment goods sectors. Consumer goods production, however, declined slightly during the period.
Demand conditions also improved with new orders rising for the sixth consecutive month, supported by domestic and international customers. Export sales expanded for a fifth successive month, with manufacturers reporting stronger demand from markets including China, Europe, Japan, North America and South Korea.
Some firms indicated that customers had accelerated purchasing activity in anticipation of future price increases and potential supply chain disruption. This precautionary buying contributed to higher levels of incoming business during May, although it may temper demand growth later in the year.
Despite the stronger trading environment, manufacturers continued to face significant cost pressures. Input prices rose at one of the fastest rates seen in nearly four years, with increases reported across a broad range of materials and inputs including chemicals, electronics, energy, fuels, plastics, metals, packaging products, paper and timber.
Businesses also cited a range of external factors affecting costs and operations, including geopolitical tensions, commodity market volatility, tariffs, labour costs and taxation.
Supply chain disruption remained a concern in May, with vendor delivery times lengthening sharply as manufacturers reported shipping delays linked to conflict in the Middle East and restrictions on passage through the Strait of Hormuz.
Concerns about supply availability and future price rises prompted many companies to increase purchasing activity and build inventories. Input buying rose for the second consecutive month, resulting in the first increase in stocks of purchased materials for more than three-and-a-half years. Inventory growth reached its strongest pace since July 2022, while finished goods stocks also increased modestly.
Rising input costs were passed on to customers, with manufacturers increasing selling prices at the fastest rate since July 2022 and recording one of the strongest rates of output price inflation in the survey’s history.
Price increases were reported across consumer, intermediate and investment goods producers, with intermediate goods manufacturers recording the steepest rise.
Business confidence also improved during May, with nearly half of surveyed manufacturers expecting output to increase over the next 12 months, citing stronger demand, product launches, expansion plans, export opportunities and hopes for more favourable geopolitical conditions. However, around one in ten respondents forecast a decline in output, pointing to policy uncertainty, cost pressures and geopolitical instability.
Commenting on the findings, Abu Ali, partner at FRP Corporate Finance, said: “Businesses are increasingly moving onto the front foot, investing in automation, production technology and operational efficiency to improve performance and position themselves for growth. That is helping manufacturers strengthen resilience while creating capacity to respond more quickly as demand improves, even as the Iran war continues to create uncertainty around energy markets, supply chains and raw material costs.
“At the same time, firms are operating in a more complex decision-making environment. We know more than three quarters of manufacturing and industrial leaders have found decision-making harder since the General Election, as they weigh up investment against a backdrop of shifting policy and uncertain conditions. Those that continue to act decisively and invest with confidence will be best placed to build on this momentum and unlock further growth.”
Maddie Walker, Accenture’s supply chain and engineering lead in the UK, said: “While it might feel like a brief sigh of relief for broader economic growth, manufacturers are far from out of the woods. Energy costs have risen sharply, and supply chains are still under strain, while caution over investment persists. Manufacturers that continue to drive productivity through AI and data-led operations will be better placed to sustain momentum and pursue opportunities in an uncertain market.”