UK business activity grows at fastest pace in eight months

Britain's private sector grew at its fastest pace in eight months in October, according to a closely watched survey, giving the chancellor a rare piece of good economic news days before his budget.

The S&P Global flash UK composite purchasing managers' index, an early reading based on surveys of manufacturing and services firms, rose to 53.1 in October from 52 in September. It was the strongest growth since February, and well ahead of the 51.7 economists had expected. Any score above 50 means activity is expanding.

Orders pick up

Output rose in both manufacturing and services. New business across the private sector grew at its quickest pace since September 2024, with firms reporting a "general recovery" in demand from customers.

Several businesses said investment in artificial intelligence and strong demand for technology services had helped support sales. Others said customers had become less cautious, and that the global economy had held up well.

There were signs of improvement in the jobs market too, with staffing levels rising for the first time since September 2024.

Budget uncertainty

But not all firms were upbeat. Some said sales had been held back by geopolitical uncertainty and weak consumer confidence, which this week fell at its fastest rate since the Brexit referendum, outside the pandemic.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "There are reports of paused spending due to a lack of clarity on domestic economic policy in the run-up to the budget, meaning the promising economic picture from the latest PMIs should provide an encouraging base for further robust economic growth through the winter months, barring any adverse surprises to businesses in the tax and spending review."

"Geopolitics, and notably the potential for conflicts in the Middle East and Ukraine to add to energy market volatility, are, however, clearly still unsettling many businesses, and cost of living concerns and broader fiscal worries are being compounded by the shift to higher borrowing costs."

A mixed picture

The figures paint a more positive picture than other data published this week. Inflation rose to 3.5 per cent in September, driven by fuel prices, government borrowing was higher than forecast, and retail sales fell by more than expected in September, while consumer confidence dropped sharply in October.

The chancellor, John Healey, delivers his first budget on Wednesday 28 October. He is expected to rule out a rise in capital gains tax and to look to the banks for extra revenue, while promising "breathing space" measures to help households and businesses with the cost of living.

What the PMI measures

The purchasing managers' index is compiled from monthly surveys of hundreds of companies, asking whether output, new orders, employment and prices are higher or lower than the month before. Because it is published before official figures, economists and the Bank of England watch it closely as an early sign of how the economy is performing.

The flash reading is based on most of the month's responses and is followed by final figures early next month. The Bank of England's rate setters meet on 5 November, when they are widely expected to consider raising interest rates to combat rising inflation, and the stronger business figures could add to the case for a rise.