UK manufacturers hit by biggest surge in cost inflation since Black Wednesday as Iran war hits economy – business live

UK manufacturers saw the steepest surge in input cost inflation since 1992, driven by the impact of the Middle East conflict on energy prices, supply chains, and customer demand. The Flash UK PMI Composite Output Index dropped sharply to 51.0 in March, indicating growth stagnation and the lowest private sector sentiment since mid-2025. Manufacturing cost inflation accelerated most since the Black Wednesday sterling crisis, putting further pressure on producers. S&P Global and PwC economists highlight how the war in Iran has disrupted business activity and supply chains, leading to higher energy and raw material prices that companies are increasingly passing onto customers. This presents a dilemma for the Bank of England, as it balances the simultaneous surge in inflation with slowing growth and softening labor market conditions. Markets currently price in a cumulative 65 basis points of rate hikes by year-end, though some analysts predict a pause at 3.75%. The PMI data underscores heightened downside risks to UK growth alongside persistent upside inflation pressures. Near-term catalysts for markets include developments in the Middle East conflict, energy price trends, and Bank of England policy decisions. The acceleration in cost pressures signals potential for sustained input inflation that could keep gold and precious metals attractive amid economic uncertainty. Broader macro uncertainty arises from the balance between ongoing geopolitical tensions and UK domestic economic resilience, with investors watching for signs of second-round wage-price inflation effects or deeper demand weakness.