UK factories, hit by Iran war, brace for higher costs and more delivery delays

By Suban Abdulla

LONDON, May 1 (Reuters) - A gauge of British manufacturers' cost pressures jumped in April and delivery delays were the most widespread since mid-2022 due to the standoff in the Strait of Hormuz, according to a survey that underscored the impact of the Iran war.

S&P Global's UK Manufacturing Purchasing Managers' Index rose to 53.7 in April from 51.0 in March. The final reading was slightly higher than the 53.6 in the provisional April data. International shipping has been disrupted since the U.S.-Israeli war on Iran began in late February, and the vital sea channel remains closed, choking off 20% of the world's supplies ?of oil and gas, and sending global energy prices surging.

Many vessels have also opted to avoid the Red Sea route to the Suez Canal due to attacks from Houthi forces in Yemen, opting to take the much longer journey around the southern tip of Africa instead.

Restrictions on ships aiming to go through the Strait of Hormuz have lengthened delivery times to the greatest extent in nearly four years, S&P said.

While the survey showed output and new orders rose last month, manufacturers' input costs jumped at the fastest pace since June 2022.

"The gain in production is partly the result of clients bringing forward purchases to mitigate expected price uplifts and supply disruptions," Rob Dobson, director at S&P Global Market Intelligence, said.

"As this process unwinds later in the year, alongside declining business optimism, growth in the sector could cool while inflationary pressures remain on high heat."

There was also some evidence of businesses passing on rising costs, with the PMI's measure of average selling prices rising at the sharpest rate since November 2022.

Business optimism about the coming 12 months fell to its lowest level in a year. Survey respondents noted concerns about the impact of the Middle East conflict and the consequences of government policies.

However, hiring increased for the first time since October 2024 when finance minister Rachel Reeves announced tax increases on employers in her first budget. (Reporting by Suban Abdulla; Editing by Hugh Lawson)