Growth in UK manufacturing eased to its slowest pace in five months during August, as smaller firms faced declining output and demand. According to the latest S&P Global UK manufacturing Purchasing Managers’ Index (PMI), the sector recorded a reading of 51.7, slightly down from 51.9 in July. While a figure above 50 signals expansion, August marked the tenth consecutive month of growth in the sector, though at a reduced rate not seen since March.

Employment within manufacturing continued to rise for the fifth month in a row, reaching its fastest pace in two years. However, this positive trend was not uniform across all company sizes. Smaller manufacturers experienced a downturn in both production and new orders, in contrast to medium and larger firms, which reported continued expansion.

Rob Dobson, director at S&P Global Market Intelligence, noted that despite the slowdown, there remain signs of resilience and optimism in the industry. He highlighted that business confidence hit a six-month high and job creation in manufacturing has been the strongest in two years, suggesting expectations of a stable outlook for the year ahead.

Economic analysts, however, raised concerns about potential headwinds influencing manufacturing performance in the near term. Matt Swannell, chief economic adviser to the Item Club, pointed to ongoing geopolitical tensions and rising energy costs as significant challenges. He specifically referenced the conflict involving Iran, noting that escalating oil and gas prices are driving up business expenses and adding uncertainty to the sector’s outlook.

The combination of external geopolitical factors and increased operating costs is expected to test manufacturers, particularly smaller firms, in the coming months. Nevertheless, the broader manufacturing landscape in the UK continues to show moderate growth, underpinned by strong hiring and sustained demand among larger producers.