𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

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UK factory production growth slowed last month as squeezed supply chains helped drive up inflationary pressure, a survey shows.

Nevertheless, overall activity across the manufacturing industry ticked up last month.

The S&P Global UK manufacturing PMI survey, watched closely by economists, showed a reading of 51.9 in September, up from 51.7 in August.

Any reading above 50.0 indicates activity is growing, while any score below means it is contracting.

September’s reading marks the 11th month in a row that overall activity has risen, with levels of output, new orders for manufacturers and employment all expanding.

However, the pace of manufacturing output growth – meaning the amount that factories produce – slowed in September to the weakest level across the past six-month period of expansion.

Companies’ supply chains were under pressure during the month, with average delivery times increasing, which reflected the impacts of port congestion, shipping delays, and geopolitical tensions leading to raw material shortages, according the survey.

Stretched supply chains put pressure on purchasing costs, with the rate of input price inflation – which measures the price of materials and components bought by manufacturers – accelerating for the first time in four months.

This was linked to higher costs for chemicals, electronics, energy and food, while a spike in diesel prices pushing up transportation costs was cited by many firms surveyed.

Rob Dobson, director at S&P Global Market Intelligence, said: “The big shift in September was in the survey’s price measures, which switched from signalling a decline in inflationary pressures to a renewed uplift.

“Energy and electronics prices remain especially elevated, while supply disruptions and rising diesel prices are now hitting transportation costs across industry.”

Mr Dobson said the autumn Budget, due to be delivered by the Chancellor later this month, will “likely prove material in steering confidence” among businesses.

The survey also revealed widening disparities between smaller and larger manufacturers.

SMEs remained under more pressure than larger firms, reporting sharp falls in production and new business, and bigger inflation jumps.

John Bryant, head of manufacturing at MHA, said: “There are encouraging signs, including the Chancellor’s recent announcement on the new age of reindustrialisation and major investment announcements from companies such as Rolls-Royce and McLaren.

“These commitments can create a valuable knock-on effect throughout the supply chain.

“However, they sit alongside a much more mixed picture across the wider sector, including recent cuts announced by JLR (Jaguar Land Rover).”

He said the Budget will be an opportunity to support businesses who are wanting to see “practical measures that encourage capital investment, tackle persistently high energy and fuel costs, and provide greater certainty around skills”.