UK Business Growth Strengthens as Services Jobs Decline
British companies continued their economic rebound into February 2026, marking a second straight month of expansion. However, the recovery has not translated into job growth, particularly in the services sector, where firms are cutting staff amid rising employment costs linked to recent tax changes.
PMI Signals Strongest Growth Since 2024
The latest preliminary survey showed the S&P Global UK Composite Purchasing Managers’ Index rising to 53.9 in February, up slightly from 53.7 in January. This represents the highest reading since April 2024 and indicates solid expansion, as any figure above 50 reflects growth in private-sector activity. Economists say the improved PMI data points to stronger business momentum compared with late 2025.
Outlook Points to Faster Economic Expansion
Survey results for January and February suggest the UK economy could grow by around 0.3 percent in the first quarter of 2026. That would mark a clear acceleration from the modest 0.1 percent expansion recorded in the final quarter of 2025. Analysts believe this pickup reflects improving confidence among businesses and consumers following reduced uncertainty after the government’s late-2025 budget.
Interest Rate Cuts Back on Agenda
Economists note that the combination of steady growth and easing inflation pressures may encourage the Bank of England to resume interest-rate reductions. While companies reported the fastest rise in selling prices since April last year, their overall cost pressures increased at the slowest pace in three months, suggesting inflation risks are moderating.
Services Sector Employment Under Pressure
Despite stronger output, employment trends remain weak. Staffing levels fell sharply in services, with some firms implementing redundancies or freezing recruitment. Employers cited higher social security contributions introduced in April 2025 as a key factor raising labour costs. In response, some businesses are turning to technology investment to expand operations without adding staff.
Manufacturing Shows Renewed Strength
In contrast to services, manufacturing activity improved. The sector’s PMI climbed to 52.0, its highest level in 18 months. Export demand also strengthened, with new overseas orders rising at the fastest pace in more than four years. Overall, new business volumes across the private sector grew at the strongest rate since September 2024.
