British businesses continued the recovery they began at the start of 2026 for the second month in a row, a survey published on Friday showed. However, the service sector witnessed continued layoffs at a significant pace, partly due to higher taxes imposed by the Labor government.
According to Reuters, the British Composite Purchasing Managers’ Index (PMI) issued by Standard & Poor’s Global rose to 53.9 points in the preliminary report for February, compared to 53.7 points in January, recording its highest level since April 2024, that is, before Prime Minister Keir Starmer’s government took power.
Chris Williamson, chief economist at the organisation, said: “Preliminary February PMI data provide further indications of an encouraging start to the year for the UK economy.”
It is worth noting that readings exceeding 50 points in the Purchasing Managers’ Index indicate growth in economic activity, while readings lower than that indicate contraction.
Williamson explained that opinion polls conducted in January and February, which reflected other indicators of a recovery in business and consumption after the uncertainty that preceded Finance Minister Rachel Reeves’ announcement of her budget last November, are consistent with growth expectations of about 0.3 percent for the first quarter of 2026, compared to a slight growth of 0.1 percent in the last quarter of 2025.
He added: “Policymakers at the Bank of England will feel optimistic about stronger growth indicators, but relatively moderate price pressures and continued worrying labor market weakness are likely to lead to increased calls for lower interest rates.”
Investors expect the Bank of England to resume cutting borrowing costs in March, based on a slowdown in inflation and a continued focus on the weak labor market.
Prices imposed by companies rose at the fastest pace since last April, while cost burdens continued to increase, but at the slowest pace in three months.
Employment saw a notable decline, especially in the services sector, with some companies indicating layoffs or hiring freezes as a result of the hike in Social Security payments approved by Reeves in April 2025. Some companies also reported that they are investing in technology to boost growth without the need for additional hiring.
The services sector PMI fell slightly to 53.9 from 54.0 in January, while the manufacturing sector index, which is smaller, hit an 18-month high at 52.0, up from 51.8.
Total new business also rose at the strongest pace since September 2024, with growth in new business for foreign manufacturers accelerating at the fastest pace in four and a half years.
