UK Business Activity Hits 13-Month Low Due to Middle East War

Business activity in the United Kingdom is declining amid a “perfect storm” of economic factors, said Chris Williamson, chief business economist at S&P Global Market Intelligence.

The S&P Global Flash UK PMI composite output index, which gauges activity in the private manufacturing and services sector, dipped to a 13-month low of 48.5 in May from 52.6 in April, according to a Thursday (May 21) press release.

“The U.K. economy is facing a perfect storm, as rising political uncertainty adds to the growing impact from the war in the Middle East,” Williamson said in the release. “Businesses are reporting falling output, surging inflation, supply shortages and job cuts in May.”

While the blame “lies first and foremost” with the Middle East conflict, companies are also reporting a toll from U.K. domestic politics, leading to more uncertainty and less hiring, spending and investment, he said in the release.

“Things could well get worse in the coming months, as we have been seeing some support to manufacturing from precautionary stock building, which will inevitably fade once warehouses are full,” Williamson said in the release. “Just as the economy shows signs of sinking into decline, prices are surging higher to herald a marked upturn in inflation in the months ahead as these costs pass through to consumers.”

The drop was the first in more than a year, the Financial Times reported Thursday, and lower than the 51.6 projected by economists polled by Reuters and the threshold of 50, which signals a contraction. The last contraction came in April of last year, following the announcement of President Donald Trump’s “Liberation Day” tariffs.

Meanwhile, similar pressures are being felt across the Atlantic. The latest inflation figures place added pressure on consumers in the United States who were already wrestling with the cost of food, housing and healthcare.

“Consumers are increasingly changing how they manage spending, liquidity and payments as elevated living costs become more deeply embedded in everyday life,” PYMNTS reported May 12.

Higher costs were especially pronounced in food inflation, with prices rising 3.2% annually. The groceries category saw its largest yearly increase since August 2023.

A February PYMNTS Intelligence report, “Generations Under Pressure: How Younger Consumers Are Coping With Higher Living Costs,” found that 89% of consumers felt financial stress tied to groceries in January, up from 84% in October.