British factories have suffered the worst slump in Europe as energy costs weigh heavily on industry.

S&P Global’s closely-watched purchasing managers’ index (PMI) for the manufacturing sector stood at 46.4 in May. Any score below 50 indicates a contraction in activity, with the latest figures marking an eight month downturn.

Factories have been struggling to navigate the global trade war kicked off by Donald Trump. However, British manufacturers face additional problems, ranging from recent increases in tax to high energy prices.

The PMI reading was the worst in Europe. Germany, which reported the lowest level of factory activity in the eurozone, had a manufacturing PMI of 48.3 by comparison.

British bosses blamed higher energy prices for the poor performance. Companies pay the highest electricity prices of anywhere in the developed world, according to government figures.

The cost of power for industrial businesses is now about 50pc more expensive than in Germany and France, and four times as expensive as in the US.

Sir Keir Starmer has been urged to dramatically cut factory energy costs amid warnings that huge bills are pushing Britain towards “de-industrialisation”.

Removing net zero levies would instantly slash the electricity price paid by manufacturers by about one quarter, according to the lobby group’s analysis.

Fhaheen Khan, at Make UK said: “Unfortunately, when tomorrow is a constant unknown, it becomes nigh on impossible to secure opportunities, which is leading to persistent declines in the sector.

“As a result of these material challenges, the manufacturing sector can only expect to continue its path of shrinking unless the Government’s upcoming unveiling of the industrial strategy can reignite investment in growth.”

Manufacturers’ continued to cut jobs in May as labour costs climbed, following the increase in the minimum wage and employers’ National Insurance contributions in April.

Rob Dobson, the director at S&P Global Market Intelligence, said: “May PMI data indicate that UK manufacturing faces major challenges, including turbulent market conditions, trade uncertainties, low client confidence and rising tax-related wage costs.”

It came as Andy Haldane, the former chief economist at the Bank of England, said that Ms Reeves’s time so far as Chancellor had been “disappointing”.

“On too many measures ... it’s felt like the fiscal cart has been put in front of the growth horse,” Mr Haldane told LBC. He warned that the Government was “not even close to doing enough” on growth.

“To be honest it’s felt penny-pinching, it’s felt small, it’s not been the sort of thing we need to get the animal spirits in the country going and therefore the country growing.”

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.