The UK economy is showing clear signs of slowing, with growing pressure on importers and exporters, as supply chain disruption and rising energy costs begin to feed through.
While headline indicators suggest marginal growth, underlying conditions point to a more fragile environment, which is shifting the focus towards control and adaptability, with forward planning, flexible routing and improved visibility becoming key to maintaining performance.
Demand moderates but remains supported by structural activity
The latest PMI data is still expanding, with the composite index at 51.0 marking eleven consecutive months of growth. However, the pace has slowed, and business confidence has eased to a nine-month low.
UK GDP was flat in January, with three-month growth of 0.2%, reflecting a slowdown rather than a contraction. More recent data suggests goods sectors are losing momentum, but activity remains in expansion territory.
Manufacturing output in March edged close to stagnation (50.1), while overall activity continues to expand, marking an extended period of growth. Demand patterns are becoming more selective, with some buyers delaying orders due to cost pressures, while others are maintaining or even accelerating purchasing to secure supply.
Export demand remains mixed, but still present. Some manufacturers reported modest increases in overseas orders, supported in part by customers bringing forward purchases and building inventory to mitigate future disruption.
This points to a market that is not weakening uniformly, but instead becoming more dynamic, with pockets of resilience alongside more cautious spending.
Input costs rise sharply, reinforcing the need for supply chain control
Cost pressures are accelerating across goods sectors, driven by higher fuel costs, transportation charges and energy-intensive inputs.
Manufacturing input prices recorded their sharpest increase in over three decades, with around 47% of firms reporting rising costs. This is feeding through into output pricing, with manufacturers increasing selling prices at the fastest rate since April 2025.
At the same time, supply chains are becoming less predictable. Around 25% of manufacturers reported longer supplier delivery times in March, reflecting extended transit times from Asia and disruption linked to rerouting and network congestion.
While these pressures are significant, they are also increasingly visible and measurable. For many businesses, this creates an opportunity to take earlier action, whether securing capacity in advance, adjusting routing strategies or reviewing supplier and inventory models to reduce exposure.
Interest rate outlook shifts as inflation risks re-emerge
At its latest meeting on 19 March, the Bank of England’s Monetary Policy Committee voted unanimously to hold the base rate at 3.75%, in line with expectations.
While acknowledging signs of weaker economic activity, policymakers highlighted the risk that rising energy costs could feed into wages and domestic pricing. The Committee signalled a more cautious stance, removing earlier guidance that pointed towards rate cuts and instead emphasising a readiness to act if inflationary pressures strengthen.
Markets interpreted the shift as a more hawkish tone, suggesting that borrowing costs may remain higher for longer if energy-driven inflation persists.
For goods-focused businesses, this reinforces the need to manage both cost inflation and financing conditions, particularly where inventory and working capital requirements are increasing.
Inventory strategies shift as businesses balance risk and demand
Changing conditions are driving a more proactive approach to inventory management. Some businesses are increasing stock levels and bringing forward orders to protect against future disruption, while others are taking a more cautious approach in response to cost pressures.
This is creating more uneven demand patterns, but also supporting short-term volume in key sectors. At the same time, inventory levels remain relatively tight overall, reflecting the ongoing impact of supply chain delays.
For supply chains, this reinforces the importance of flexibility — balancing stock availability against cost, while maintaining the ability to respond quickly as conditions change.
US and EU markets provide stability, but cost pressures remain a factor
The United States and EU continue to provide relatively stable demand conditions, supporting UK trade flows.
US inflation remains moderate at 2.4%, with interest rates held at 3.50%–3.75%, while the EU is close to target at 1.9%. These conditions are helping to sustain demand, even as global uncertainty increases.
However, both markets remain exposed to rising energy costs, which could influence pricing and demand if sustained. For UK exporters, this means opportunities remain, but with increasing sensitivity to cost and lead time.
Stay ahead of changing conditions with Metro
Metro helps importers and exporters turn market complexity into a controllable, manageable process.
Whether adapting to rising costs, mitigating supply chain delays or optimising inventory flow, Metro provides the insight and operational support needed to maintain performance in a changing market.
To discuss how current economic and supply chain conditions could impact your business, EMAIL Laurence Burford, Chief Financial Officer.
