Private sector productivity decreased for the first time since the year 2023 in the United Kingdom.
Private sector in Great Britain has reported a significant downturn after 18 months of growth, with the first slump happening in April. S&P Global's 'flash' UK composite purchasing managers' index (PMI) fell to 48.2 in April from 51.5 in March, marking the lowest reading in nearly two years and far below the anticipated 50.4 by economists. This means a contraction in business activity as any number below 50 signifies this[1].
The manufacturing PMI plummeted from 45.3 in March to 44.0 in April, a dismal performance for almost three years, attributed mainly to escalated trade tensions resulting in reduced export volumes[1]. US tariff measures, imposed by President Donald Trump, are believed to have negatively impacted global business confidence, causing this contraction[1].
The imposed tariffs include a 10 per cent baseline tariff on all US goods, a 25 per cent duty on foreign steel and aluminium products, a 145 per cent levy on most products from China, and announced but suspended 'reciprocal' tariffs on dozens of countries like India and Vietnam[1]. In response, China and Canada introduced retaliatory measures, for instance, China implementing a 125 per cent tariff on US goods[1].
According to S&P Global, the lingering uncertainties and economic concerns have pushed businesses to adopt a 'wait-and-see approach' leading to a decline in new work internationally and domestically for the fifth consecutive month[1].
Major UK firms have warned that the recent changes, including the National Insurance contribution increase and wage hike, could lead to job cuts, wage growth restriction, or slower hiring processes[2]. The S&P claimed that staffing levels decreased for the seventh successive month in April, reflecting cuts across both the service and manufacturing sectors[2].
Chris Williamson, chief business economist at S&P Global Market Intelligence, commented that while businesses have been treading water since the autumn 2023 budget, they're finding it increasingly difficult to maintain themselves in April[2]. Williamson also mentioned that the subdued output and low confidence levels will likely lead to interest rate reductions by the Bank of England in May[2].
The automotive sector is significantly impacted by these tariffs as there's a 25% tariff imposed on automotive vehicles entering the US, posing challenges for UK and European manufacturers, and potential opportunities if consumer demand switches from US-manufactured vehicles[3]. Moreover, interconnected supply chains in the automotive industry mean that even manufacturers with US bases face challenges due to tariffs on components imported from countries like Canada and Mexico[3].
Some other implications of US tariffs involve increased costs and uncertainties for British exporters and potential challenges for collaborations between UK and US research institutions due to the increased cost of importing equipment and materials[3]. While the tariffs have had a relatively small negative impact on the UK economy, the limitations on fiscal constraints and sticky inflation hinder policymakers' ability to alleviate these effects[2].
- Businesses are warned that recent changes, such as the National Insurance contribution increase and wage hike, could lead to cost-cutting measures such as job cuts or slower hiring processes [2].
- The manufacturing PMI has plummeted due to escalated trade tensions, with the 10% baseline tariff on all US goods being one of the main contributors to the reduction in export volumes [1].
- The uncertainties and economic concerns have forced businesses to adopt a 'wait-and-see approach', leading to a decline in new work domestically and internationally for the fifth consecutive month [1].
- The S&P Global Market Intelligence claimed that staffing levels decreased for the seventh successive month, reflecting cuts across both the service and manufacturing sectors [2].
- Tariffs imposed by President Donald Trump, including a 25% duty on foreign steel and aluminium products, have negatively impacted global business confidence, causing contractions in business activity [1].
