UK services activity at four-month high in August

Britain’s services activity grew last month at the fastest pace since April and price pressures eased, according to a survey that pointed to a more benign inflation outlook and a settling of the economy after July’s elections.

The S&P Global UK Services Purchasing Managers Index rose in August to 53.7 from 52.5 in July, above a preliminary estimate of 53.3.

The survey added to signs of an upturn for business since the July 4 election which delivered a landslide victory for Prime Minister Keir Starmer’s Labour Party.

Cost pressures for services companies and their selling prices increased at the weakest rate since early 2021, something that will be welcomed by the Bank of England ahead of its Sept. 19 announcement on interest rates.

The central bank cut borrowing costs last month for the first time since March 2020, to 5.0 per cent from a 16-year high of 5.25 per cent. Investors expect another cut before the end of the year.

“August data highlighted a recovery in UK service sector performance as improving economic conditions and domestic political stability helped to bolster customer demand,” said Tim Moore, economics director at S&P Global.

However, the survey showed optimism for the year ahead cooled slightly and growth in employment slowed.

“Hopes of interest rate cuts and steady improvements in broader economic conditions helped to support confidence, but some firms cited concerns about policy uncertainty in the run-up to the autumn budget,” Moore said.

Finance minister Rachel Reeves has warned that taxes will have to rise in her Oct. 30 budget to help ease the pressure on the public finances.

The composite PMI – which combines the services data with Monday’s manufacturing survey – rose in August to 53.8 from 52.8 in July, revised up from a flash estimate of 53.4.

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