UK private sector shrinking as firms cut jobs; pressure to raise taxes as government borrowing jumps – as it happened

Britain’s private sector is shrinking for the second month running as factory output falls at the fastest rate in a year and a half, a new survey shows.

The latest poll of purchasing managers at UK companies found that private sector output is decreasing in May, although at a slower rate than in April.

Manufacturing production fell at the fastest rate since October 2023, although this was moderated by a “fractional rise” in service sector output.

UK firms reported that clients were cautious this month, due to business uncertainty, leading to a drop in new orders. However, worries about US tariffs have dropped this month, after Donald Trump delayed tariffs on America’s trading partners and agreed a trade deal with the UK.

Export orders fell this month, which manufacturers blamed on the new US 10% tariff on UK imports, and on wider uncertainty about global trade condititions.

Worryingly, manufacturers reported that they cut jobs at the fastest pace in five years, through redundancies, restructurings, hiring freezes, and the non-replacement of departing staff. This was blamed on subdued demand, and higher payroll costs – following the increase in national insurance contributions at the start of April.

Overall, the UK PMI composite index rose to 49.4, up from April’s 48.5, but still below the 50-point mark that separates expansion from contraction.