LONDON (Reuters) -British businesses are having their strongest month in a year thanks to a rebound in the dominant services sector, according to a survey published on Thursday.
The preliminary reading of the S&P Global UK Composite Purchasing Managers' Index (PMI) for August is likely to be welcome news for finance minister Rachel Reeves, but its suggestion of stronger inflation pressure might worry the Bank of England.
The PMI, covering manufacturing as well as services, picked up to 53.0 - its highest
since August last year - from a final reading of 51.5 in July.
A Reuters poll had forecast only a small increase to 51.6.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey suggested the pace of economic growth had accelerated over the summer after a sluggish spring.
"It's evident from survey measures of order books, however, that the demand environment remains both uneven and fragile," Williamson said.
"Companies report concerns over the impact of recent government policy changes, as well as unease emanating from broader geopolitical uncertainty," he added.
The PMI for the services sector rose to 53.6 from July's 51.8.
But the manufacturing PMI weakened to 47.3 from 48.0, further below the 50.0 growth threshold and its lowest in three months as factories took a hit from the global trade war led by U.S. President Donald Trump.
Companies across both sectors shed jobs, albeit less quickly than in July. Firms reported higher labour costs after Reeves raised payroll taxes for employers in April when a sharp increase in the minimum wage also took place.
Complicating the picture for the BoE, services firms increased prices at the fastest pace in three months.
The central bank is trying to work out whether it can stick to its pace of one quarter-point interest rate cut every three months while inflation pressures are mounting.
Thursday's PMI survey showed business activity expectations for the year ahead were the highest since October 2024.
(Writing by William Schomberg; Editing by Toby Chopra)
