UK Manufacturers Hit by Worst Cost Inflation Spike Since Black Wednesday as Iran War Drives Oil Prices
PMI data reveals sharpest one-month acceleration in manufacturing costs in over three decades
The PMI data shows growth slowing sharply across both manufacturing and services sectors while costs rise — a combination that raises the spectre of stagflation.
The manufacturing cost spike reflects the direct transmission of higher oil prices through supply chains. With Brent crude trading well above pre-conflict levels, input costs for UK manufacturers have surged across energy-intensive sectors.
The comparison to Black Wednesday is striking. In September 1992, the UK's exit from the European Exchange Rate Mechanism triggered a currency crisis that sent import costs soaring. Today's cost shock is driven not by currency movements but by the physical disruption to global energy supply caused by the Iran war.
Services sector growth has also slowed, suggesting the economic impact is broadening beyond manufacturing into the wider economy.
Analysis
Why This Matters
The Black Wednesday comparison puts the current cost shock in historical context. This is the worst single-month deterioration in UK manufacturing costs in over 30 years.
Background
The Iran war has disrupted global energy markets, with the current oil crisis removing an estimated 20 million barrels per day from global supply — far worse than the 4.5 million barrels lost during the 1973 oil embargo.
Key Perspectives
The combination of slowing growth and rising costs is the textbook definition of stagflation, the most difficult economic condition for policymakers to address.
What to Watch
Bank of England response. Whether the cost shock feeds through to consumer prices and triggers further interest rate action.