UK business activity rises to one-year high as services sector leads rebound

Business activity across the UK’s private sector has hit a one-year high this month, as the services industry led a summer rebound, according to new survey data.

Firms nevertheless have been cutting hiring for 11 months in a row.

S&P Global flash UK composite purchasing managers’ index (PMI) showed a reading of 53.0 in August, up from 51.5 in July.

This was the highest score since August 2024.

The flash figures are based on preliminary data. Any score above 50.0 indicates that activity is growing while any score below means it is contracting.

Growth this month was primarily driven by the service sector, the largest part of the UK’s economy, spanning industries including hospitality, entertainment and culture, finance and real estate.

Businesses typically pointed to improved demand conditions after the spring, when the threat of US President Donald Trump’s tariff changes was affecting demand from abroad.

Services firms have enjoyed new work coming in over August and benefited from rising sales at home and overseas, the survey showed.

Chris Williamson, chief business economist for S&P Global Market Intelligence, said economic growth “continued to accelerate over the summer after a sluggish spring”.

He said: “The services sector has led the expansion, but manufacturing also showed further signs of stabilising.”

However, he flagged that the demand environment was “uneven and fragile” amid “unease emanating from broader geopolitical uncertainty”.

For the UK’s manufacturing sector, output continued to decline this month, and firms recorded the sharpest decline in new work since April.

Furthermore, total workforce numbers decreased for the 11th month in a row in August, according to the PMI survey.

Businesses surveyed have been cutting staffing levels or slowing the pace of hiring in response to greater cost pressures.

Input cost inflation rose to the highest rate since May, reflecting higher prices such as for food, transport bills, and international shipping.

For another month running, firms said suppliers were passing on higher national insurance contributions through pricing.

In turn, private sector businesses have been hiking their own prices charged to customers – particularly those in the services industry as they grapple with higher staff costs.