British factory output continued falling in January, as manufacturers reported that cost inflation had hit a two-year high.
The S&P Global UK manufacturing PMI survey, watched closely by economists, recorded a reading of 48.3 last month, from 47 in December.
Any reading above 50 indicates that activity is growing while any score below means it is contracting.
Business optimism consequently remains close to December's two-year low, while input price inflation has spiked to a two-year high
New orders and jobs continued to fall across the board, as firms warned that a weak economic outlook in the UK was hitting small factories hardest.
Companies pointed to rising input costs combined with tax increases announced at the October budget as extra pressures facing them.
Rob Dobson, director at S&P Global Market Intelligence, which carried out the survey, said while the rising costs were hitting small producers hardest, big companies “fared better, seeing output and new orders recover during January”.
“There nevertheless seems little scope for any imminent improvement in performance across the board,” he added, pointing to poor demand both in the UK and abroad.
He added that increases to the minimum wage and employer national insurance contributions would continue to hit firms, with both policies coming into effect in April.
“Business optimism consequently remains close to December’s two-year low, while input price inflation has spiked to a two-year high,” he added.
