Downturn across UK firms stretches into May despite tariffs respite

A slump across the UK’s private sector continued into the first weeks of May, though at a slower rate than in April, amid improving confidence following the easing of US trade tariffs.

The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 49.4 in May, up from 48.5 in April.

The flash figures are based on preliminary data. Any score above 50.0 indicates activity is growing while any score below means it is contracting.

The latest reading was marginally stronger than expected, with a consensus of analysts having predicted a reading of 49.3 for the month.

While the UK’s largest sector, services, returned to growth, the manufacturing sector fell at the fastest rate since October 2023.

Comments from the PMI survey respondents suggested there were fewer concerns than April about US trade tariffs, but manufacturers said the heightened levels of uncertainty had still hit business confidence.

It comes after the UK struck a deal with the US earlier this month to slash tariffs on sectors including steel and automotive manufacturers.

Nonetheless, manufacturers reported the fastest pace of job cuts for five years, as the impact of rising employer taxes continued to affect companies after the policy came in at the start of April.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said of Thursday’s economic survey data: “After an ‘awful April’, businesses reported a milder May.

“Sunny weather also provided a welcome boost to business activity in some parts of the economy.

“However, output still fell slightly when measured across all goods and services for a second successive month, hinting at the possibility of the economy contracting in the second quarter.

“Furthermore, although brighter news on tariffs and trade appears to have helped restore some confidence among businesses, sentiment about prospects in the year ahead is still subdued.

“Job cutting consequently remains worryingly aggressive, especially in manufacturing, as concerns about weak demand have been exacerbated by the rise in staff costs linked to the national insurance and minimum wage changes that came into effect in April.”