UK Business Activity Hits 21-Month High as Services Lead January Surge

Private sector activity in the U.K. expanded at its fastest pace in nearly two years in January, according to S&P Global’s latest flash PMI data, signaling a stronger start to 2026 for the economy.

The composite PMI rose to 53.9 from 51.4 in December, marking the ninth straight month above the 50 level that separates growth from contraction. The services sector drove the expansion, recording its strongest growth in 21 months as post-Budget clarity unlocked new projects and boosted client spending.

Manufacturing output also improved for a fourth consecutive month, reaching its fastest pace since October 2025. Some producers reported stronger exports and renewed customer restocking.

New orders rose for the third time in four months, posting their strongest increase since October 2024. Export demand saw its biggest improvement in 18 months, with manufacturers citing stronger orders from Europe, the United States, China, and emerging markets.

Despite the pickup in activity, firms continued to cut jobs, with employment falling at a faster pace than in December. Service providers reported particularly sharp workforce reductions, driven by rising payroll costs and cautious hiring plans.

Input cost pressures remained elevated, especially in services, where wage growth, transport costs, and raw material prices weighed on margins. As a result, businesses raised prices at the fastest rate since August 2025.

Business confidence improved for a second month, reaching its highest level since September 2024, supported by better sales pipelines and hopes of lower borrowing costs. However, firms remained wary of geopolitical risks, weak productivity, and persistently high costs.