UK factories struggle as trade woes hammer sentiment, PMI shows

By Andy Bruce

(Reuters) - British manufacturers endured a torrid March as the U.S. tariff threat and looming tax increases at home contributed to a plunge in new orders and ebbing optimism, a business survey showed on Tuesday.

The S&P Global UK Purchasing Managers' Index (PMI) for manufacturing, a measure of activity in British factories, slid to its lowest since October 2023, when Britain was in recession, as it dropped to 44.9 in March from 46.9 in February.

While it was fractionally higher than a preliminary reading of 44.6, the survey confirmed a picture of collapsing new export orders, which contracted at the fastest rate since August 2023.

Data company S&P Global said small manufacturers suffered the most in March.

Exporters around the world are waiting anxiously for the U.S. government's April 2 announcement of its full tariff plans. Stock markets have fallen sharply in response to President Donald Trump's push to rebalance global trade flows.

British manufacturers are also grappling with an increase in payroll taxes that comes into force this month, as well as an increase in the national minimum wage.

Official data released last week showed British industrial output shrank 1.2% last year.

The preliminary PMI readings published on March 24 painted a brighter picture for the much larger services sector, where output increased at the fastest pace for seven months.

"Manufacturers reported a tough trading environment, beset by rising geopolitical tensions, weak client confidence and economic slowdown in both domestic and overseas markets," the PMI report said.

Falling export orders were "mainly linked to weaker demand from the U.S. and Europe", S&P Global said.

The survey showed only 44% of manufacturers expected to see output increase over the coming year, down from 56% a month earlier.

(Reporting by Andy Bruce; Editing by Hugh Lawson)