The surge in new business drives a strong rebound in the UK service sector, and PMI achieved its biggest increase since April 2024

The Zhitong Finance App learned that a survey released on Wednesday showed that as concerns about US tariffs eased, the surge in new business helped the British service industry achieve its biggest growth in more than a year last month. However, British companies are still worried about the prospects for potential domestic tax increases. According to the data, the S&P Global UK Services Purchasing Managers' Index (PMI) rose from 51.8 in July to 54.2 in August, reaching the highest level since April 2024. This figure is higher than the initial estimate of 53.6, and greatly exceeds the boom/dry line of 50. 50 is the boundary between economic growth and contraction.

Tim Moore, chief economist at S&P Global Market Intelligence, said, “The August data showed that output growth accelerated, which is encouraging. Orders quickly rebounded after a brief decline in July. As the end of summer approaches, the foundation of the UK service economy is more stable.”

The composite PMI (including the manufacturing PMI revised downward on Monday) rose from 51.5 in July to 53.5 in August, reaching its highest point in 12 months, higher than the preliminary reading of 53.0 in August.

These optimistic figures may give Chancellor of the Exchequer Rachel Reeves a sigh of relief as she looks at the fall budget. Many businesses blame her decision to raise social security contributions in last year's budget, which has led to weak demand and rising costs.

Among the Group of Seven (G7) developed economies, the UK has the highest inflation rate. According to Wednesday's data, the price increase of service companies last month was the biggest since April. In April, Reeves' policy of raising national insurance contributions and minimum wage standards came into effect.

The company reported the biggest increase in costs in three months and continued to reduce the number of employees. The employment data for PMI statistics has been declining for 11 consecutive months, the longest period of continuous decline from 2008 to 2010 (excluding the COVID-19 pandemic).

Although the UK economy grew faster than other G7 countries in the first half of this year, this was largely due to increased government spending and temporary export growth brought by companies to avoid some US tariffs.

PMI's measure of new business in the service sector showed the biggest monthly increase since March 2021, reflecting increased consumer demand and the first increase in exports since April.

Lower borrowing costs and reduced concerns about US tariffs have also boosted companies' expectations for future business volumes.

Moore said, “However, many service providers still mention the high level of uncertainty in government policies and concerns about tax increases that may be introduced in the fall budget.”