Growth picks up among UK services firms after election result, PMI shows

Published Mon, Aug 5, 2024 · 04:55 PM

The S&P Global UK Services Purchasing Managers Index rose in July to 52.5 from 52.1 in June and revised up slightly from a preliminary estimate of 52.4. PHOTO: REUTERS

BRITISH services companies reported an influx of new orders and the biggest rise in employment for over a year during July as optimism rose on the back of Prime Minister Keir Starmer’s election victory, a survey showed on Monday (Aug 5).

The S&P Global UK Services Purchasing Managers Index rose in July to 52.5 from 52.1 in June and revised up slightly from a preliminary estimate of 52.4.

The survey added to signs of an upturn in business sentiment since the July four election which delivered a landslide victory for Starmer’s Labour Party.

A gauge of new business rose to its highest level since May last year while the future activity index struck a five-month high – something that survey compiler S&P Global linked to the election outcome and expectations for lower interest rates.

The Bank of England cut interest rates last week for the first time since March 2020, to 5 per cent from a 16-year high of 5.25 per cent.

“Albeit only one month into the second half of 2024, the latest survey results bode well for a reasonable GDP growth print in Q3,” said Joe Hayes, principal economist at S&P Global Market Intelligence.

UK manufacturers show fresh signs of life after election, PMI shows

Lloyds Bank’s headline gauge of business confidence in Britain rose to 50 per cent in July from 41 per cent in June, matching May’s eight-year high.

Optimism floods UK firms in wake of election result: Lloyds survey

“July marked a disappointing month for the distribution sector, with retailers feeling the sting from a harsh mix of unfavourable weather conditions and ongoing market uncertainty,” says CBI principal economist Martin Sartorius.

UK retail sales stumble again in July

The quarterly Deloitte survey of chief financial officers showed 23 per cent of large British companies reported high or very high uncertainty, down from 36 per cent in the previous survey and the lowest reading since late 2015.

Uncertainty in UK boardrooms lifts after Labour win, Deloitte reports

Inflation is finally back at the BOE’s 2 per cent target, having hit double digits in 2022 in the wake of the pandemic and Russia’s invasion of Ukraine.

The Bank of England gets a positive hint about rate cuts from service prices

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He said price pressures, while close to their lowest since early 2021, remained historically high – a worry for the BOE, which signalled it will take a cautious approach about cutting interest rates further.

The composite PMI – which combines the services data with last week’s manufacturing survey – rose in July to 52.8 from 52.3 in June and revised up from a flash estimate of 52.7.

The manufacturing PMI showed output in British factories expanded faster in July than in any other developed market surveyed by S&P Global. REUTERS

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