UK manufacturing: New order development this month was the weakest since March 2021: Photograph: Reuters/Phil Noble

UK manufacturing companies have been hit by a slowdown in demand and new orders amid a looming recession, new information confirmed on Thursday.

In keeping with S&P World’s survey, June’s total composite PMI index, which tracks exercise within the economic system, was unchanged at 53.1, nevertheless, new order development this month was the weakest since March 2021.

The brand new order index fell to 50.8, displaying near-stagnation. Any studying over 50 signifies development.

The info additionally indicated that the British economic system was “operating on empty” as enterprise confidence fell to ranges that sometimes sign a recession.

Learn extra: Is the UK heading right into a recession?

It slumped to its weakest since Might 2020, as companies fretted about prospects slicing again on spending because of the present value of dwelling disaster, and the influence of runaway inflation on the longer-term financial outlook.

The enterprise expectations index fell by 4.6 factors in June, which was the most important month-to-month decline for the reason that begin of the COVID-19 pandemic. Each producers and repair suppliers reported the bottom diploma of enterprise optimism since Might 2020.

Regardless of weaker new enterprise development, the newest survey signalled a sturdy and accelerated rise in staffing numbers.

Job creation was the quickest for 3 months, led by stronger hiring within the service sector.

Greater ranges of employment mirrored efforts to fill vacancies, meet elevated enterprise necessities and course of unfinished workloads.

However survey respondents continued to report appreciable difficulties with discovering appropriate candidates to interchange departing employees.

Watch: Minister describes UK’s shrinking economic system as ‘disappointing’

Companies additionally stored elevating their very own costs, as they handed on larger vitality, gas and wage prices to prospects. Corporations reported rising pay pressures and growing worries about gas and vitality payments.

“The economic system is beginning to seem like it’s operating on empty,” Chris Williamson, chief enterprise economist at S&P World Market Intelligence stated.

“Present enterprise development is being supported by orders positioned in prior months as corporations report a near-stalling of demand. Producers particularly are combating falling orders, particularly for exports, and the service sector is already seeing indicators of the current development spurt from pent-up pandemic demand transfer into reverse amid the rising value of dwelling.”

He added: “Enterprise confidence has now slumped to a stage which has up to now sometimes signalled an imminent recession. The weak spot of the broad movement of financial information thus far within the second quarter factors to a drop in GDP which the forward-looking PMI numbers counsel will collect momentum within the third quarter.

Learn extra: FTSE falls as inflation drives up UK debt prices

“Whereas there are some indicators that the inflation might quickly peak, the survey information counsel the speed of inflation will in the meantime stay traditionally excessive for a while to return, indicating that the UK appears to be like set for a troubling mixture of recession and elevated inflation as we transfer into the second half of the yr.

In the meantime, Peter Colman, associate at international consultancy Simon-Kucher & Companions, stated: “One other disappointing flash PMI for the UK this morning … It’s turning into more and more apparent that UK companies within the manufacturing and companies sectors are caught between a rock and a tough place.

“With unprecedented ranges of inflation, slowing volumes and recession fears, implementing worth will increase is the one viable possibility to handle margin erosion – an answer that many companies have been determined to keep away from however could not have the ability to take action.

“With no apparent finish in sight, the agenda inside many UK boardrooms is popping from development to profitability.”

Watch: How does inflation have an effect on rates of interest

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