UK services PMI rises as price pressures intensify in August
Britain's services sector extends its expansion in August, adding to signs the UK economy remains resilient despite disruption linked to the U.S.-Iran war. The latest survey also shows a broader pick-up in prices charged and input costs, a trend that could complicate the Bank of England's inflation outlook.
Highlights
- UK Services PMI rises to 52.5 in August from 52.1 in July, marking strongest sector growth since April despite missing 52.8 flash estimate.
- Price pressures intensify as more services firms raise output charges and report higher input costs, adding to Bank of England inflation concerns.
- Composite PMI, including manufacturing, climbs to 52.5 in August, indicating modestly improving momentum across the broader UK private sector.
August survey points to firmer services growth
According to Reuters, S&P Global reported that its final UK Services Purchasing Managers' Index rose to 52.5 in August from 52.1 in July, marking the strongest growth since April. The reading is slightly below the preliminary estimate of 52.8 but still indicates expansion for a second straight month in Britain's dominant services sector.Tim Moore, economics director at S&P Global Market Intelligence, said the August data highlights improving operating conditions across the UK service economy. He said business and consumer spending posts further gains after declining during the second quarter of 2026.
The survey also shows that the index of new work eases slightly to 50.7 in August from 50.8 in July. Employment declines at the slowest pace since October 2025, supported by improved sales pipelines and broader market conditions.
Price trends add to Bank of England concerns
More firms report raising the prices they charge and facing higher input costs after both measures slowed in July. That increase in cost pressures is likely to remain in focus for policymakers assessing inflation risks.The Bank of England is watching companies' pricing plans closely as it gauges how much of the energy price surge caused by the Middle East conflict is passed on to customers. Optimism among services firms rises to its highest level since February despite concerns about the Iran war and inflation.
The composite PMI, which includes manufacturing, rises to 52.5 from 52.2, also reaching its highest level since April. The combined reading suggests momentum in the wider private sector improves modestly at the end of the summer.
Our earlier coverage of the UK’s surge in borrowing costs explained how rising global bond yields were pushing gilt yields higher and squeezing the government’s fiscal headroom. We noted that with debt financing more expensive, Westminster faced tougher budget trade-offs and growing pressure to spell out credible plans for fiscal discipline ahead of the October 28 Budget.
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