UK composite PMI rises to one-year high

The UK S&P Global Composite PMI rose to 53 in August 2025 from 51.5 in the previous month, exceeding market expectations for only a slight improvement to 51.6 and marking the fastest expansion in private-sector activity in a year, according to a flash estimate.

The momentum was overwhelmingly driven by the services sector, where activity accelerated to 53.6 from 51.8 in July, also reaching a one-year high. This surge more than offset the deeper downturn in manufacturing, where the PMI fell to 47.3 from 48, signaling the sharpest contraction in factory output since April.

The strength in services was reflected in rising new business volumes at the aggregate level, which posted their biggest increase since October of last year. Demand was particularly strong in consumer-facing industries and professional services, while manufacturers reported the steepest fall in new orders in four months.

Survey respondents pointed to weaker foreign demand amid growing trade protectionism, high input costs, and ongoing supply chain frictions, especially in goods trade with the EU and the US.

Price pressures also resurfaced. Input cost inflation climbed to its highest since May, with many firms highlighting the impact of higher National Insurance contributions and labor expenses. Rising energy and material costs were also flagged as burdens for manufacturers. These pressures led companies to raise output charges at a faster pace, suggesting that services-led inflation could prove sticky even as goods prices softened.

Looking forward, business expectations for the year ahead improved, with confidence buoyed by resilient domestic demand, easing financing conditions, and hopes that recent global trade frictions could stabilize. Service providers were notably optimistic, while manufacturers remained cautious due to weak export prospects and uncertainty about the trajectory of tariffs.

Still, the divergence between robust services and struggling manufacturing highlights a two-speed economy, leaving policymakers at the Bank of England with a delicate task of balancing modest growth with persistent inflationary risks.