The S&P Global Flash UK Manufacturing PMI dropped to 47.3 in December 2024, down from 48 in November and below market expectations of 48.2, according to preliminary estimates. This marks the sharpest contraction in the UK’s manufacturing sector in eleven months, underscoring mounting challenges as production and demand falter.

Steeper Decline in Production and New Orders

December saw a second consecutive month of declining production, with the decrease accelerating significantly. Manufacturers reported a sharp drop in new orders, driven largely by customer destocking and weaker demand from European clients. Export sales suffered particularly, posting the fastest decline since October 2023, reflecting external economic pressures and softening global trade dynamics.

Rising Costs Amid Declining Backlogs

Backlogs of work in the manufacturing sector continued to decline, signaling reduced activity levels. Adding to manufacturers’ woes, December recorded the steepest rise in purchasing prices since January 2023. Input cost inflation, fueled by supply chain constraints and pricing pressures, created further strain on profit margins at a time when demand remains sluggish.

Outlook Remains Clouded

As the UK manufacturing sector faces a challenging close to 2024, the outlook for 2025 appears uncertain. Persistent headwinds from weak domestic and international demand, combined with rising input costs, weigh heavily on recovery prospects. Without a significant turnaround in demand or effective policy interventions, the sector’s contractionary phase may extend into the new year.