Good news for UK businesses
New PMI data published by S&P Global shows faster economic growth at the end of the year, with businesses buoyed in part by the post-Budget lifting of uncertainty. The PMI is consistent with GDP growth accelerating to 0.2% in December, albeit with a more modest 0.1% gain signalled for the fourth quarter as a whole.
UK business activity picked up momentum in December, linked partly to the lifting of uncertainty following November’s Budget. At 52.1, the PMI headline Composite Output Index regained almost all the ground lost from a fall to 51.2 in November, reaching the third-highest level seen over the past 15 months, according to the initial flash estimate.
The current PMI is broadly consistent with GDP growing at a near 0.2% quarterly cadence in December, albeit with a more modest 0.1% gain signalled for the fourth quarter as a whole. This follows a 0.1% rise in GDP in the third quarter, as signalled by both the official GDP data and the PMI.
It’s a big relief that business confidence has not slumped in a repeat of last year’s post-Budget gloom. Instead, companies have ended the year on a slightly more optimistic note amid signs of improving demand now that some of the uncertainty created by the Budget has cleared. New orders are in fact growing at the fastest rate for over a year.
However, the overall pace of output and demand growth remains lacklustre, and the overall expansion is still very dependent on technology and financial services activity, with many other parts of the economy struggling to grow or in decline, said Chris Williamson,
Chief Business Economist at S&P Global Market.
“Job losses are also worryingly widespread, and it remains to be seen whether the uptick in orders during December will persuade more companies to start hiring again, especially as rising staff costs continue to be reported as one of the key concerns of businesses. These higher cost pressures were in turn cited as the key cause of a renewed upturn in selling price inflation across both goods and services.”
“The sluggish growth and worrying jobs data from the flash PMI data therefore suggest that the odds remain in favour of a further cut to interest rates at the December MPC meeting, but that the path to further rate cuts in 2026 remains very data dependent, as policymakers await confirmation that price pressures are going to soften materially as the year proceeds,” he said.
