London May 22 2025: UK private sector output decreased for the second month running in May, according to the latest S&P Global Flash UK PMI survey.
However, the rate of decline moderated since April and was only marginal. A fractional rise in service sector activity helped to offset the fastest downturn in manufacturing production since October 2023.
Business activity expectations for the next 12 months recovered from the two-and-a-half year low seen in April, despite a faster reduction in new order intakes. Comments from survey respondents generally suggested that there were fewer concerns about the impact of US tariffs on longer-term domestic economic prospects, although many manufacturing firms noted that elevated global business uncertainty had still weighed on confidence.
The headline seasonally adjusted S&P Global Flash UK PMI Composite Output Index registered 49.4 in May, up from 48.5 in April but still the second-lowest reading since October 2023. Reduced levels of business activity were mostly attributed to subdued order books and caution among clients in response to rising business uncertainty. The downturn was driven by an accelerated reduction in manufacturing production, which contrasted with a slight rise in service sector output.
May data indicated that new business intakes decreased again in both the manufacturing and service sectors, with the former recording the steeper pace of contraction. Measured overall, new work across the private sector economy fell to the greatest extent for two-and-a-half years. This was often attributed to cutbacks to non-essential spending and delayed investment decisions among clients amid rising global economic uncertainty.
Total new orders from abroad decreased at a solid pace in May, led by another steep fall in the manufacturing sector. Survey respondents cited the negative impact of US tariffs on export sales, as well as reluctance among overseas clients to place orders due to general uncertainty about global trade conditions. That said, some firms reporting an upturn in new work from abroad cited new export opportunities in Asia and Europe.
Subdued demand, higher payroll costs and a lack of pressure on business capacity all contributed to a further reduction in private sector employment. This was linked to a mixture of redundancies, restructuring, hiring freezes and the non-replacement of voluntary leavers. Manufacturers recorded a particularly steep decline in staffing numbers, with the pace of job shedding the fastest for five years.
UK private sector companies indicated a sharp increase in their average cost burdens during May, although the rate of inflation eased considerably from April’s 26- month high. Similarly, output charge inflation eased to its lowest so far in 2025. Higher input prices were attributed to strong pay pressures, as well as rising utility bills, shipping costs and prices paid for technology services. A number of firms noted lower fuel costs, while some cited falling imported raw material prices due to exchange rate appreciation against the US dollar.
