The S&P Global UK Composite PMI dropped to 48.5 in April 2025 from 51.5 in March, marking the first contraction in British economic activity since October 2023. Although the reading was slightly revised upward from the flash estimate of 48.2, it still came in well below the market consensus of 50.4, signaling a sharper-than-expected slowdown across key sectors of the UK economy.
UK business activity contracts
The downturn was broad-based, affecting both manufacturing and services, with the manufacturing PMI inching up marginally to 45.4 from 44.9 in March, remaining deep in contraction territory, while the services sector saw a more striking reversal, falling to 49 from 52.5. This represented the first decline in services output in 17 months and a significant deviation from earlier expectations of continued resilience in the sector.
Underlying the broader slowdown, new business inflows declined for the fourth consecutive month, as firms across industries reported growing hesitancy among clients. Service providers in particular highlighted weakening client confidence, attributing the pullback to increased financial market volatility and heightened uncertainty surrounding new US tariffs, which have raised concerns about cross-border trade and costs. The growing sense of caution has begun to ripple across hiring decisions as well. Employment levels fell again in April, with many companies opting not to fill vacant positions. This cautious approach to labor stems from a combination of subdued demand and rising employment costs, including wage pressures and higher National Insurance contributions, which have intensified the financial strain on employers.
Business sentiment worsens
Business sentiment also deteriorated sharply. Expectations for future activity dropped to their lowest levels since 2022, reflecting increased anxiety over the domestic economic outlook, persistent inflation in input costs, and an uncertain external trade environment. The downturn in the composite PMI adds to evidence that the UK economy may be entering a soft patch, raising questions about the resilience of the post-pandemic recovery and potentially complicating the Bank of England's monetary policy path in the months ahead.
