UK Business Activity Slows to Six-Month Low in March on Supply Chain Strain

EcoPulse24 | London

UK private sector business activity growth slowed to its weakest pace in six months in March 2026, according to preliminary flash data from S&P Global. The UK Composite PMI fell to 51.0 in March from 53.7 in February, significantly below expectations of 52.9. The reading marked the softest pace of expansion since September 2025, as disruptions linked to the Middle East conflict drove input costs to their highest level since February 2023 and weighed on new business inflows for the first time in four months.

Services Growth Slows to Six-Month Low

The UK Services PMI declined to 51.2 in March from 53.9 in February, missing forecasts of 53.0 and recording its slowest expansion since September 2025. New work for service providers slowed amid pressure from falling orders from abroad, with foreign clients citing the postponement of projects in the Middle East region and the reduction of international travel amid regional instability. Supply chain disruptions also weighed on operating margins, as rerouted shipping added to cost burdens for services firms dependent on imported goods. The deteriorating environment led companies to lower their pace of hiring.

Manufacturing Growth Eases but Holds Above Trend

The UK Manufacturing PMI eased modestly to 51.4 in March from 51.7 in February, above expectations of 50.1, signaling continued expansion in the sector. Output growth slowed as goods producers cited an adverse impact on global demand from the war in the Middle East. Around 25% of UK manufacturers surveyed reported longer supplier delivery times during the month, marking the sharpest slowdown in delivery performance since July 2022. Extended shipping from Asia, rerouted via the Cape of Good Hope, and production stoppages at Middle East petrochemical suppliers contributed to input delays. Supply chain pressures and weaker global demand also reduced purchasing stocks and moderately lowered post-production inventories.

Input Costs Hit Highest Since February 2023

Overall input cost inflation in the UK hit its highest level since February 2023 in March, with the monthly rate of acceleration described as the fastest since October 1992. Manufacturers reported the steepest cost increases since October 2022 and the sharpest month-on-month acceleration since October 1992, reflecting a sharp surge in energy, fuel, transport, and raw material costs. Output charges surged in response, adding to inflationary pressures across the supply chain and raising concerns about consumer price inflation in the coming months.

Business Confidence Plunges to Nine-Month Low

Forward-looking business confidence plunged to a nine-month low in March, with firms across both services and manufacturing citing concern over the Middle East conflict's impact on demand, supply chains, and inflation. New business inflows declined for the first time in four months. Employment fell at a faster pace than in February, with firms opting not to replace departing staff amid the uncertain environment. S&P Global noted that the overall survey picture was consistent with a notable deterioration in UK business conditions compared to the first two months of 2026.

EcoPulse24 Analysis

EcoPulse24 Analysis: The March UK PMI data provides clear evidence that the Middle East conflict is now transmitting economic pain directly into the British private sector through supply chain disruptions, energy cost surges, and declining foreign orders. The near-historic pace of input cost acceleration raises the prospect of renewed inflationary pressure at a time when the Bank of England had been cautiously moving toward monetary easing. For GCC observers, a slowing UK economy with rising inflation represents a cautionary signal: the conflict's economic consequences are broadening well beyond the immediate region, with potential implications for global trade volumes, commodity demand, and investor risk appetite in markets including the Gulf.