UK private sector activity expands for two straight years

The S&P Global UK Composite PMI rose to 50.9 in January 2025, recovering from a 14-month low of 50.4 in December and surpassing market expectations of stagnation at 50.

UK private sector activity expands for two straight years

This marks two consecutive years of growth in private sector activity. The expansion was driven entirely by the services sector (51.2 vs. 51.1 in December 2024), which offset a milder contraction in manufacturing (48.2 vs. 47). However, underlying demand showed clear signs of weakness. New business orders fell at their sharpest pace since 2023, as companies reported sluggish demand, with clients cutting back on discretionary spending. This soft demand environment led to continued declines in staffing levels, with the rate of job cuts in both January and December reaching their fastest since 2009. Businesses attributed this to hiring freezes and the non-replacement of employees who left voluntarily.

Cost pressures intensified

Adding to challenges, cost pressures intensified. Input prices for both manufacturers and service providers rose at the steepest rate in over 18 months, straining profit margins. Looking ahead, optimism for future business activity dimmed further, as expectations for growth declined for the sixth consecutive month, reflecting mounting uncertainty about demand, costs, and broader economic conditions.