Britain’s manufacturing sector contracted at a sharper pace in August as new orders and export business slumped, reflecting trade tensions, rising costs and weak client confidence, according to closely watched data.

The S&P Global UK manufacturing purchasing managers’ index (PMI) fell to 47.0 last month from 48.0 in July – the lowest reading in three months. Economists had expected a smaller decline to 47.3. Any figure below 50 signals a contraction in activity.

Rob Dobson, director at S&P Global Market Intelligence, said: “Weak market conditions, US tariffs and downbeat client confidence all contributed to the dearth of new contract wins. Job cuts were also reported for a tenth successive month, with factory headcounts dropping to one of the greatest extents post-pandemic.”

The survey showed a steep fall in new orders, the fastest in four months, with respondents pointing to higher wage and national insurance costs as a factor behind reduced demand. Export sales also dropped for the 43rd consecutive month, underscoring the persistent pressure facing UK manufacturers as geopolitical tensions weigh on global trade.

Despite the weak data, optimism among firms edged up to its strongest level in six months, with many predicting a recovery in output over the coming year. Mike Thornton, head of industrials at RSM UK, said: “We tend to see a slight drop-off in new orders seasonally as the summer holidays hit, but the fall this year was sharper than previous years. Hopefully it’s a seasonal blip and we will see further signs of a recovery later in the year.”

The latest figures mirror a wider global slowdown in manufacturing. In the eurozone, factory activity shrank for a 26th consecutive month, while US manufacturers also reported weakening demand and rising costs as trade tensions with China and Europe escalate. The data is likely to add to pressure on the Bank of England to cut interest rates again this year as policymakers seek to shield the economy from faltering growth.