The private sector in the UK is experiencing a downturn, marked by a drop in the S&P Global flash UK composite purchasing managers' index (PMI) to 48.2, indicating contraction. Factors contributing to this decline include the impact of recently announced US tariffs on exports and rising operational costs tied to new National Insurance and minimum wage regulations. The combination of falling export orders and escalating costs has raised alarms about the economic outlook, prompting speculations about potential interest rate cuts by the Bank of England in its next meeting.
The biggest concern lies in a slump in exports amid weakened global demand and rising global trade worries, but higher staffing costs have also piled pressure on companies - linked to the National Insurance and minimum wage changes that came into effect at the start of the month.
Just as export orders are falling at the sharpest rate since May 2020, during the pandemic lockdowns, firms' costs spiked higher to a degree not seen for over two years.
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