The S&P Global UK Composite PMI stood at 50.5 in February 2025, edging slightly lower from 50.6 in January and aligning with market expectations.
UK composite PMI edges lower
The data pointed to a fragile expansion in the UK economy, with growth exclusively driven by the services sector, which improved to 51.1 from 50.8 in the previous month. This modest services expansion helped counterbalance a deeper downturn in manufacturing, where activity contracted at a sharper rate, falling to 46.4 from 48.3. The trend mirrored similar patterns observed in other major European economies, highlighting continued struggles in the industrial sector amid weaker global trade and subdued domestic demand.
Business inflows decrease
The latest survey signaled the sharpest contraction in new business inflows in a year and a half, as firms pointed to widespread client budget cuts and tepid business investment, both of which weighed on order books. The weaker demand environment prompted businesses to reduce their workforce at the fastest pace since the global financial crisis, excluding the pandemic period. This labor market deterioration reflected cost-cutting efforts in response to prolonged economic uncertainty and tighter financial conditions.
Input costs surged
On the pricing front, input costs surged at the steepest pace since May 2023, driven by rising wages, energy expenses, and supplier charges. In turn, businesses raised their output prices to pass on higher costs, with many citing the need to adjust for an anticipated increase in staff expenses following new labor cost provisions outlined in the latest Budget.
Looking ahead, firms remain cautious about growth prospects, with many awaiting clearer policy signals and potential fiscal support to revive investment and consumer confidence. The outlook for the UK economy will likely depend on how well the services sector can sustain momentum in the face of persistent manufacturing weakness and elevated inflationary pressures.
