UK private sector in best month since August 2024, PMI shows

[LONDON] British businesses grew at the fastest pace in 17 months in January, according to a closely watched survey, pointing to a turnaround in private sector activity. 

S&P Global’s purchasing managers’ index rose to 53.7, up from 51.4 the month before and above the crucial 50 threshold indicating growth. While slightly below the 53.9 flash estimate, it was the strongest reading since August 2024, just before the first tax rises of the new Labour government started denting sentiment.

The report’s authors said the results “signalled stronger growth momentum across the UK private sector economy.” It added to evidence that firms are shaking off the impact of higher employment costs and greater global turbulence amid US President Donald Trump’s trade war.

Businesses reported the sharpest increase in new work and the highest levels of optimism for the year ahead since September 2024. 

Services providers expanded at the fastest pace in five months thanks to an increase in new project starts and a recovery in investor sentiment after the November budget. Factories also grew in January, albeit at a slower pace than the powerhouse services sector.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said the results “suggest decent growth will continue.”

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The overall PMI reading indicates the economy will grow 0.3 per cent in the first quarter, in line with the Bank of England’s forecasts, according to Pantheon.

Across the private sector, firms are still facing headwinds from higher employment costs, however, with job losses accelerating in December.

S&P’s survey also suggested that businesses are passing on some of the recent cost increases. Firms put up prices at a faster rate in January, despite a slight slowdown in input cost inflation. BLOOMBERG