UK factory production has hit a 21-month high as companies stockpiled ahead of anticipated price rises and supply chain disruption following the Iran war, according to a new survey.
But fading intakes of new work meant that overall growth in the manufacturing industry slowed in June.
The S&P Global UK manufacturing PMI survey, watched closely by economists, showed a reading of 52.5 in June, down from 53.9 in May.
Any reading above 50 indicates that activity is growing while any score below means it is contracting.
It marks the eighth month in a row that the reading has been positive for the manufacturing industry, which spans sectors such as automotives, aerospace, chemicals, food and drink processing.
The survey found that factory output expanded at the fastest rate since September 2024, with many manufacturers benefiting from companies strategically stockpiling goods.
Rob Dobson, director of S&P Global Market Intelligence, linked this to firms choosing to “safeguard against supply chain disruptions and expected price rises”.
“A drop in the rate of growth of new work intakes suggests this boost is already starting to fade,” he added.
Energy prices have risen following the US-Israel war with Iran and the effective closure of the Strait of Hormuz, and many firms are braced to feel the effects later in the year.
Despite peace talks between the US and Iran, conflicting reports on the reopening of the critical transit route and existing damage to energy infrastructure mean supply chain disruption is expected to prevail.
Manufacturers, who often use a lot of energy, have been reporting difficulties including shortages of freight capacity, port disruptions and customs delays.
“Manufacturers’ optimism about the year ahead also remains tepid, with many concerned about geopolitical tensions and uncertain over the future course of government policy,” Mr Dobson said.
He added that there was “mixed news” on prices, as “severely strained supply chains led to raw material shortages” and therefore suppliers charging more, but that a recent drop in energy prices had helped cool the overall rate of inflation in June.
