UK Companies See Cost Pressures Spreading at Record Pace, PMI Shows

UK Companies Face Record Surge in Cost Pressures, PMI Index Signals Inflation

Record Cost Increases and Inflation Risks in the UK Economy

By Andy Bruce

Unprecedented Surge in Input Costs

MANCHESTER, England, April 23 (Reuters) - The share of British companies reporting rising costs surged by a record amount this month, a clear warning of higher inflation ahead as fallout from the Iran war spreads through the economy, a survey showed on Thursday.

Data company S&P Global said its gauge of input prices in this month's Flash UK Composite Purchasing Managers' Index showed the biggest increase on the month since records began 28 years ago, hitting its highest level since a bout of double-digit inflation in late 2022.

Bank of England Concerns

The survey is likely to add to the Bank of England's worries that a leap in energy prices could ignite broader inflation expectations, although how much a weakening jobs market will counteract this remains a key question.

PMI Index and Economic Activity

The headline reading of the composite PMI, a monthly gauge of activity in Britain's manufacturing and services sectors, rose to 52.0 in April from 50.3 in March.

It exceeded all forecasts in a Reuters poll of economists that pointed to a reading of 49.9, just below the 50 threshold for growth.

Investor Sentiment and Official Data

Investors view Britain's economy as highly vulnerable to the jump in energy prices caused by the war, although official data show the economy grew strongly in the months immediately before the conflict.

Thursday's PMI readings echoed official data that showed soaring factory input costs, marked by the second-biggest month-on-month increase since records began in 1984.

Expert Insights on Inflation Outlook

Chris Williamson, chief business economist at S&P Global, said the data suggested inflation could rise more than many forecasters have predicted.

Drivers of Price Increases

"Prices are rising not just because of surging energy costs, but also due to increases in charges levied for a wide variety of goods and services, with price hikes often stoked by supply concerns," Williamson said.

Impact of Middle East Crisis

While the composite PMI pointed to economic growth of around 0.2% per quarter, Williamson said the details of the survey suggested this could not be sustained without a resolution of the crisis in the Middle East.

Sector-Specific PMI Results

Services Sector Performance

The PMI for the services sector rose to 52.0 from 50.5 in March - again much better than expected but with a record increase in the input prices index.

Its gauge of future output sank to its lowest level since April 2025, when U.S. President Donald Trump announced sweeping tariffs on imports from other countries.

Manufacturing Sector Trends

The manufacturing sector PMI rose to its highest level since May 2022 at 53.6 in April, up from 51.0 - although the increase largely reflected a big increase in delivery times caused by disruptions from the Iran war. In normal times, the PMI is designed to interpret longer delivery times as a good thing.

The factory PMI input prices gauge rose to its highest level since June 2022 and has increased by more than 25 points over the last two months - the biggest such increase since the survey started in 1992.

Conclusion

(Reporting by Andy Bruce; Editing by Joe Bavier)