(Bloomberg) -- Confidence among British manufacturers tumbled to a two-year low in December amid a slump in exports and mounting global trade tensions.
S&P Global said Thursday that its overall manufacturing purchasing managers’ index slipped to an 11-month low of 47, down from 48 in November. The revised estimate was slightly below the flash reading of 47.3.
It marked a third straight month that the sector was below the 50 threshold separating growth and contraction.
S&P Global’s sub-index measuring optimism over future activity fell for all business sizes, hitting a two-year low. Firms cited rising costs and a weaker economic environment for the dip in confidence. Export sales dropped at the fastest pace in 10 months.
The new Labour government’s hike in payroll taxes sent “a winter chill through the labour market,” causing the steepest job cuts in the survey since February, according to Rob Dobson, director at S&P Global Market Intelligence.
The survey showed early signs that a deteriorating global backdrop may add to pressures already facing factories, such as Britain’s stagnant growth and rising employment costs. The threat of a renewed bout of protectionism sparked by Donald Trump looms large with the US President-Elect promising sweeping tariffs on imports.
“Global market conditions are also providing a growing headwind, with export sales hit by lower demand from Europe, Asia and the US,” Dobson added.
The figures are the latest to show the UK economy stalling at the end of 2024 after a sharp slowdown in growth since Labour took power in July.
GDP was flat in the third quarter and the Bank of England expects the fourth quarter to show no growth as well. The tepid performance is in sharp contrast to the first half of the year when the UK almost matched the fastest growth in the Group of Seven.
However, economists cautioned that the dip in sentiment seen in the factory survey may exaggerate the impact on official activity data.
“The PMI results can be heavily affected by swings in business sentiment and the initial negative reaction of businesses to the autumn Budget could mean that recent survey outturns may be overstating the loss of momentum in the sector,” said Matt Swannell, chief economic adviser to the EY Item Club.
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