UK manufacturing PMI sinks to 9-month low as orders dry up

By David Milliken

LONDON (Reuters) - A gauge of British manufacturing activity released on Monday pointed to the sharpest contraction in nine months, as orders from domestic and foreign customers fell and ongoing supply chain disruption pushed up costs.

The S&P Global manufacturing Purchasing Managers' Index sank to 48.0 in November from 49.9 in October - below an earlier estimate of 48.6 and the 50 level that divides growth from contraction.

S&P cited headwinds from a 25 billion pound ($32 billion) rise in employment taxes in the new Labour government's Oct. 30 budget, a 7% increase in Britain's minimum wage, disruption to shipping in the Red Sea and the threat of global goods tariffs.

"Manufacturers are left facing an environment of high costs, low demand and raised uncertainty for the foreseeable future," S&P director Rob Dobson said.

"While companies of all sizes are experiencing a downturn, small companies are the hardest hit, reporting especially marked drops in output, new orders and new export business," he added.

Last week U.S. President-elect Donald Trump said he planned to impose a 25% tariff on all goods the United States imports from Canada and Mexico and he has floated blanket tariffs of 10% to 20% on virtually all imports.

Some businesses said clients were delaying or cancelling investment projects due to increased costs following the budget and broader global uncertainty, S&P said.

Orders, output and employment all fell at the fastest pace in nine months.

Official data showed British manufacturing output volumes in September were 0.7% lower than their level a year earlier.

($1 = 0.7875 pounds)

(Reporting by David Milliken; Editing by Toby Chopra)