The service sector, which comprises most of the UK economy, grew fastest in three months in June, surpassing its French and German counterparts.
UK company activity increased slightly in June, with new orders rising for the first time this year. The private sector has expanded as company mood has improved due to some relaxation of the US tariff policy.
But it is not all good news. According to a recent survey, employers have reduced employment more rapidly and expressed concerns about the Middle East war, which has now come to a ceasefire.
While investors expected potential retaliation from Iran after US attacks on its nuclear sites, global markets fell on Monday, and oil prices briefly reached a five-month high before retracing their gains.
Official figures released earlier this month showed that the British economy slowed down significantly in April due to shockwaves from US President Donald Trump’s declaration of broad tariffs and one-off damage from the termination of a tax holiday on property sales.
The service sector, which makes up most of the UK economy and includes the hotel, entertainment, cultural, financial, and real estate sectors, grew at its fastest rate in three months in June, surpassing its French and German counterparts.
The growing service industry helped to overcome the sustained decline in manufacturing in June.
Factory production fell for the ninth consecutive month. It was due to a reduction in orders for exports abroad.
While it was the least severe drop since January, British manufacturers are still underperforming compared to their counterparts in the largest economies in the eurozone.
Standard & Poor (S&P) Global Flash UK composite PMI (purchasing managers’ index) increased from 50.3 in May to 50.7 in June.
The figures are based on preliminary data. Any score of more than 50.0 indicates that activity is expanding, and a lower score means it is contracting.
The poll showed that after six months of contraction, the volume of new business continued growing in June.
Chris Williamson, chief business economist at S&P Global Market Intelligence, expressed that he finds the UK economy was quite in a “sluggish state” lately.
Even though business conditions have improved since the dip in April, which was due to concerns about recession.
The economic activity development is still surprisingly slow. The second-quarter gross domestic product (GDP) increased at a quarterly pace of just 0.1%.
Business confidence is dumped compared to last year. It started to decline again in June.
The June data was at a time when tensions in the Middle East were on the rise, along with anxieties about the effects of recent government policies and global trade protectionism.
It was the reason why companies reduced their employment as they struggled between decreased demand, muted confidence, and greater labor costs linked to the previous autumn’s budget.
S&P Global claimed that employment was affected because Rachel Reeves, the finance minister, introduced increases in employers’ social security contributions.
Employers were reducing their workforces through layoffs and hiring freezes.
Elliott Jordan-Doak, senior UK economist in Pantheon Macroeconomics, gave a different opinion. He states that businesses are showing more optimism about the future in June compared to May, suggesting that the economic outlook is improving.
He continued by saying that domestic demand is better than external demand, which makes sense as Mr. Trump’s tariff threats are hurting international trade.
The PMI indicates that business confidence is slowly getting its comeback after being hammered by tax hikes and trade fears.
Nevertheless, businesses have a growing list of problems to worry about, including increased geopolitical tensions.
As the Bank of England sees a rise in the headline rate of consumer price inflation that it assumes is short-lived, selling prices rose at the slowest rate since January 2021.
