The latest survey on Monday revealed an uptick in Britain’s substantial services sector, providing some encouragement to finance minister Rachel Reeves as she prepares for a critical economic address. The preliminary UK S&P Purchasing Managers’ Index (PMI) for services rose to a seven-month high of 53.2 in March from February’s 51.0.
Meanwhile, the manufacturing PMI declined to an 18-month low of 44.6 from 46.9 in February, amid concerns over a potential global trade conflict prompted by U.S. tariffs. Export sales in manufacturing suffered their steepest decline since August 2023.
Overall, the composite PMI, which includes both sectors, reached a six-month high of 52.0, up from 50.5 seen in February.
According to Chris Williamson, chief business economist at S&P Global Market Intelligence, these trends suggest a modest 0.1% economic growth for Britain in the first quarter of 2025.
Despite the optimism in services, businesses cut jobs in anticipation of an upcoming tax increase for employers and a minimum wage hike. However, compared to the level observed in February, the rate of job cuts decelerated.
Williamson pointed out that consumer-oriented businesses and manufacturers remain challenged by domestic and international pressures. Reeves is expected to announce a significant downgrade in the UK’s economic growth outlook on Wednesday, which, coupled with elevated borrowing costs, may lead her to scale back planned spending increases.
The PMI survey indicated a slower rise in input costs for businesses, while the prices charged remained stable from February, partially to counteract rising employment costs.
The Bank of England (BOE) is monitoring the effects of increased employer social security contributions, a measure Reeves introduced last October, while hinting it might reconsider its regular interest rate cuts if economic conditions change.
The manufacturing PMI’s measure of future output experienced its largest drop since the series began in 2012, excluding the onset of COVID-19 lockdowns in March 2020. Concerns about U.S. tariffs and uncertain forecasts for export sales due to global market volatility were highlighted by S&P Global.
