PMI edges higher as new orders rise, but job cuts deepen
British business activity expanded modestly in June, according to the S&P Global UK Composite PMI, which rose to 50.7 from May’s 50.3, surpassing expectations of 50.5. This marks the highest level this year and signals that growth, though weak, is continuing in the face of global uncertainty.
The modest uptick was driven by a rebound in new orders, which rose above the 50.0 threshold for the first time since November. However, employment levels deteriorated, with firms cutting jobs at a faster pace due to cost pressures and soft demand. Elevated concerns over Middle East tensions also dampened business sentiment.
Services sector leads growth, manufacturing lags
The UK’s dominant services industry continued to outperform, with the services PMI rising to 51.3, its best reading in three months. In contrast, manufacturing contracted for the ninth consecutive month, although the pace of decline eased slightly. The manufacturing PMI rose to 47.7 from 46.4, still firmly below the growth threshold.
“The PMIs suggest the biggest hit to the economy was in April and things are now starting to recover,” said Thomas Pugh, chief economist at RSM UK. “But the subdued level still points to near stagnation.”
Outlook remains cautious amid tariffs and conflict
Official data showed a sharp slowdown in April due to U.S. tariffs and the end of a UK tax break on property sales. The PMI survey’s measure of future output weakened in June, reflecting elevated political and economic uncertainty, particularly in the Middle East.
Investor sentiment was fragile, with world shares falling and oil briefly spiking to five-month highs on fears of Iranian retaliation following U.S. strikes. The UK’s PMI survey was conducted between June 12 and 19, overlapping with these geopolitical developments.
Slowing prices raise rate cut hopes
Price pressures continued to ease, with selling prices rising at their slowest pace since January 2021. This cooling inflation backdrop could support a Bank of England rate cut in August, especially with the headline inflation rate rising temporarily.
The report also noted that job losses were influenced by April’s increase in employers’ social security contributions introduced by Finance Minister Rachel Reeves, adding further cost burdens on businesses.
