The UK is facing its worst supply chain stress since the start of the Ukraine-Russia war
UK manufacturers are facing the most severe supply-chain disruptions in over four-and-a-half years, as the war in the Middle East and the closure of the Strait of Hormuz send energy costs soaring and delivery times stretching.
The S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) posted 51.0 in March, down from 51.7 in February and below the flash estimate of 51.4.
While the headline reading remains above the 50.0 no-change mark for a fifth straight month, the details paint a much darker picture. Production contracted for the first time in six months, input-price inflation hit a 41-month high, and suppliers’ delivery times lengthened at the fastest rate since mid-2022 – the period when global supply chains were reeling from Russia’s invasion of Ukraine.
A quarter of the roughly 650 companies surveyed reported longer lead times in March, with many explicitly linking the delays to the Middle East conflict and the closure of the Strait of Hormuz, which exacerbated strains already caused by the Red Sea crisis and earlier post-pandemic bottlenecks.
Average input costs rose at the quickest pace since October 2022. Nearly half of firms (49%) reported higher purchase prices, fueled by spikes in energy, oil, and gas. The seasonally adjusted Input Prices Index jumped 15 points month-on-month, its second-steepest gain since the survey began in January 1992.
“UK manufacturing output contracted for the first time in six months in March, as the war in the Middle East and ongoing concerns about domestic economic policy led to a scaling back of production,” said Rob Dobson, Director at S&P Global Market Intelligence.
“The impact of the war also caused noticeable shifts in the cost and supply chain backdrops. Delivery times lengthened to the greatest extent since mid-2022, while the acceleration in input price inflation was the steepest since the aftermath of the UK’s withdrawal from the ERM in 1992. The resulting high-cost environment and shortages of inputs were also factors stymying production volumes.”
Production fell across the board, with a solid contraction in the intermediate goods sector more than offsetting slower growth at consumer and investment-goods producers. Manufacturers cited rising uncertainty, stock-management moves, and weaker client confidence as reasons for the pullback.
Business optimism about the year ahead slumped to its lowest level since September 2025. The Future Output Index dropped 5.6 points in a single month, the steepest one-month decline in a year, as firms worried about geopolitical risks, domestic policy direction, and persistent supply-chain pressures.
Employment also deteriorated. Job losses accelerated to the fastest pace since September 2025 as squeezed margins made manufacturers reluctant to hire, even as they raised selling prices at the quickest rate since May 2025.
“The one possible positive is that, despite rising at a slower rate, the trend in new order inflows held up better than production,” Dobson said.
“This suggests that the drop in production is currently more of a supply issue than one caused by an outright downturn in demand – though it’s hard to see how demand can prove resilient in the face of current high energy prices and economic uncertainty unless there’s a swift resolution to the war in the Middle East.”
