UK manufacturing growth slowed in August, but companies increased hiring at the fastest rate in two years.
The latest S&P Global UK manufacturing PMI showed a reading of 51.7 in August. That figure fell slightly from 51.9 in July.
A PMI reading above 50 indicates growth. A reading below 50 points to contraction.
Despite the slowdown, August marked the 10th consecutive month of manufacturing growth. However, the sector recorded its weakest expansion since March.
Factory output continued to rise for a fifth consecutive month. Manufacturers reported stronger demand from both UK and overseas customers.
However, smaller manufacturers faced tougher conditions. Their output and new orders declined during August.
Medium-sized and larger manufacturers performed better. These companies benefited from stronger demand and continued expansion.
Manufacturers also reduced stock purchasing during the month. The survey linked this trend partly to caution over energy prices.
Energy costs remain a major concern for UK businesses. Recent oil and gas price increases have added pressure to production costs.
Despite those challenges, manufacturers showed greater confidence about the year ahead. Business confidence reached a six-month high.
Hiring also provided a positive signal. Employment increased for the fifth consecutive month, with companies adding workers at the strongest rate in two years.
Rob Dobson, director at S&P Global Market Intelligence, said manufacturers still showed signs of optimism.
“The rate of expansion in the UK manufacturing sector cooled in August, with output and new order growth losing traction,” he said.
However, Dobson highlighted stronger confidence and employment growth. He said the figures suggested manufacturers had reduced precautionary stockpiling as uncertainty eased.
Matt Swannell, chief economic adviser at the Item Club, warned that manufacturers could face difficult months ahead.
He pointed to higher energy costs as a key challenge. Rising oil and gas prices could increase business expenses and put further pressure on manufacturers.
Swannell also warned that higher inflation could reduce household spending power.
The ongoing conflict in the Middle East remains another major source of uncertainty. Businesses now face the challenge of maintaining growth while managing higher costs and cautious consumer demand.
Overall, the latest figures show a mixed picture for UK manufacturing. Production and employment continue to grow, but smaller firms face pressure and rising energy costs remain a concern.
