UK Private Sector Shrinks Most Since 2022 as Tariffs Hit Orders
Britain’s private sector suffered its biggest contraction in more than two years after Donald Trump’s US tariffs caused orders from abroad to dry up and triggered recession fears, according to a closely watched survey.
S&P Global’s purchasing managers’ index tumbled to 48.2 in April, a sharp decline from 51.5 the previous month. It was worse than the 50.4 reading expected by economists and below the 50 threshold separating growth and contraction.
It was the worst performance since the aftermath of Liz Truss’ calamitous premiership in 2022 and will dent hopes that the economy was starting to pick up momentum after stagnating in recent years.
UK businesses pointed to a chilling effect from the White House’s trade war with new work from abroad declining at the fastest pace since the start of the pandemic. For manufacturing it was the sharpest drop since early 2009, when excluding the pandemic.
“Anecdotal evidence suggested that US tariff uncertainty and general concerns about the economic outlook had encouraged a wait-and-see approach to major spending decisions among clients,” S&P said in a statement. It added that the tariffs had triggered a “subsequent slump in confidence among clients.”
The survey was collected April 9-22 in the aftermath of the US president’s “Liberation Day” tariffs. Trump slapped the baseline 10% tariff on UK goods, with British officials still scrambling to reach an agreement with the White House to lift the measures.
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The survey follows downgrades to the International Monetary Fund’s UK growth forecasts in response to the US tariffs on Tuesday.
S&P said that confidence in the outlook for the year ahead plunged to the weakest since Oct. 2022 with firms citing the risk of recession at home and abroad.
The manufacturing sector saw output contract at the fastest pace in 32 months. However, the powerhouse services industry also struggled. The services business activity index showed a contraction for the first time since late 2023 when the economy suffered a small technical recession — defined as two consecutive quarters of falling output.
The impact of Labour’s first budget was also felt with a hike in payroll taxes and the minimum wage coming into effect in April. Firms reduced headcount for a seventh straight month with many bosses not replacing workers who voluntarily left.
It helped to boost input cost inflation to the highest since early 2023, while prices charged rose at the fastest pace in almost two years.
Source : Bloomberg
