UK Business Activity Hits One-Year High As Services Sector Drives Growth

UK private sector activity reached a one-year high in August, supported by a rebound in services, according to the latest S&P Global flash composite purchasing managers’ index (PMI). The index recorded 53.0, up from 51.5 in July and the strongest reading since August 2024. A score above 50 indicates growth in activity.

The services sector, which covers hospitality, culture, finance and real estate, was the main driver of expansion. Survey respondents reported stronger domestic demand and rising overseas sales through the summer. This followed a subdued spring period, when concerns around US trade tariffs weighed on order books.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The services sector has led the expansion, but manufacturing also showed further signs of stabilising.” He noted, however, that demand remains “uneven and fragile” against a backdrop of geopolitical uncertainty.

Manufacturing output continued to contract in August. Firms reported the sharpest drop in new work since April, reflecting weaker demand conditions and export challenges.

Labour market pressures remain a feature across the private sector. The PMI survey showed total workforce numbers declining for the 11th consecutive month, as businesses either reduced headcount or froze recruitment. Rising costs were cited as a key factor behind staffing decisions, with companies seeking to control overheads in a competitive environment.

Input cost inflation reached its highest level since May, driven by higher food prices, increased transport costs and international shipping charges. Firms also highlighted supplier pricing adjustments linked to national insurance contributions. In response, many service providers passed on higher costs to customers, lifting output charges at one of the fastest rates this year.

For project managers, the data points to an economy in recovery but with clear delivery challenges. Demand in services is strengthening, providing opportunities for growth-oriented projects, while manufacturing remains constrained. Cost inflation, persistent labour pressures and global uncertainty continue to shape operating conditions, requiring careful planning for both resource allocation and pricing strategies.