UK Businesses Show Growth and Inflation Hit from Iran War

• British business activity has grown at the slowest pace in six months, and manufacturers' input costs accelerated at the fastest rate since 1992, according to a survey that underscores the risks to the government's economic agenda from the Iran conflict. The S&P Global Purchasing Managers' Index (PMI) is the first major survey to show the impact on British businesses from the United States (U.S.) - Israeli war on Iran, which is expected to slow already weak growth and push up inflation.
• The preliminary composite Purchasing Managers' Index, covering manufacturers and non-retail services businesses, sank to 51.0 in March from 53.7 in February, which was the joint-highest since August 2024. "March's flash PMIs show that the conflict in the Middle East is already going a long way to boosting inflation and extinguishing GDP growth. And this is just the start," Paul Dales, chief United Kingdom (U.K.) economist at ⁠ Capital Economics, said.
• S&P Global's gauge of input prices for British manufacturers, which measures how fast costs are rising, jumped to 70.2 in March from 56.0 in February, the biggest leap from one month to the next since sterling tumbled out of Europe's Exchange Rate Mechanism in 1992. Higher prices for fuel, transport and energy-intensive raw materials were the main reasons for the increase.
• The survey's headline reading was below all forecasts in a Reuters poll of economists, though above the 50-level that divides growth from contraction. It was also higher than it was in some of the run-up to finance minister Rachel Reeves' budget in November, when many businesses feared they would be hit with higher taxes.
• The equivalent PMI for the euro zone fell much less sharply, dropping to 50.5 in March from 51.0 in February. Although President Donald Trump paused some attacks on Iran ⁠ on Monday, March 23, 2026, and said there had been productive talks, British Prime Minister Keir Starmer said the government needed to plan on the basis that the conflict could continue for some time, and on Tuesday, Iran launched waves of missiles at Israel. Reeves was due to address parliament on Tuesday on the impact of the war on the economy, which she had promised to boost before an election in 2024, and on possible support measures for energy users.

(Source: Reuters)