UK manufacturers have experienced the steepest one-month rise in costs since Black Wednesday in 1992, as the ongoing Middle East conflict pushes oil prices higher, new survey data reveals.
The latest purchasing managers’ index (PMI) highlights the impact of geopolitical tensions on the UK economy, showing slowing growth across both manufacturing and services alongside rising costs.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which compiles the data, said: “Output growth across manufacturing and services has slowed to a crawl, with companies blaming lost business on the events in the Middle East. This includes heightened risk aversion among customers, surging price pressures, higher interest rates, and travel or supply chain disruptions.”
He added: “Inflationary pressures have surged due to rising energy prices and disrupted supply chains.”
The survey reported the highest level of input price inflation in manufacturing since October 2022, with the month-on-month change marking the fastest increase since the fallout of Black Wednesday in 1992. Sterling’s collapse at that time had pushed up import costs after the government raised interest rates in a failed attempt to remain in the European Exchange Rate Mechanism.
S&P noted that the recent surge in costs is primarily linked to fuel, transportation, and energy-intensive raw materials.
The composite PMI, covering both manufacturing and services, stood at 51 in March, indicating continued expansion but at a slower pace than February’s 53.7.
Emily Sawicz, industrials senior analyst at RSM UK, said: “Sentiment remains fragile, with manufacturers showing only a modest dip in overall confidence. The cautious outlook reflects uncertainty around inflation, interest rates, and household and business spending.
“Despite some resilience, geopolitical tensions continue to concern UK manufacturers. The recovery many hoped for in 2026 now looks delayed, with rising energy costs and persistent inflation risks threatening momentum. Should these pressures worsen, the sector’s fragile growth could even reverse later in the year.”
The report also highlighted declining new orders and falling export sales, with the fastest drop in overseas orders since April last year. S&P attributed this to postponed projects in the Middle East and reduced international travel.
Now in its fourth week, the US-Israel war on Iran has driven global oil and gas prices higher, disrupted supply chains, and caused infrastructure damage in the Gulf, including the effective closure of the Strait of Hormuz.
Chancellor Rachel Reeves is set to outline plans in the House of Commons on Tuesday to mitigate the impact on consumers if these disruptions persist.