UK economy shows resilience as services buoy growth

What's happened

A block of UK indicators shows services activity expanding and consumer confidence firming, while manufacturing remains modest. PMI readings point to continued growth in Q3, supported by tech investment and exports, though inflation and public finances remain a risk.

What's behind the headline?

What this means for readers

• The services sector is driving near-term growth, while manufacturing remains under pressure.
• Consumer sentiment improvement suggests households are less pessimistic about the economy’s trajectory.
• Inflation and public finances remain the main downside risks to sustained growth.

Key forces at work

• Tech investment is supporting investment and hiring, contributing to a positive demand backdrop.
• Export orders are improving, helping manufacturers weather domestic weakness.
• The policy response will hinge on inflation trajectory and public finances, shaping rate expectations.

How we got here

Recent data illustrate a resilient UK economy. Services activity is strengthening, PMIs point to modest growth, and consumer confidence has improved. However, inflationary pressures and borrowing costs persist, and the government faces fiscal headwinds.

Our analysis

Reuters reports on Lloyds PMI, Independent PMI releases, and official data from ONS and S&P Global, with quotes from economists and industry bodies. The coverage shows a mix of optimism in services, caution in manufacturing, and vigil over inflation and borrowing costs. Reuters notes services PMI at 52.8 in August; Independent highlights a 52.5 composite PMI; ONS data on retail and borrowing frames the domestic backdrop.

Go deeper

• What part of the economy will lead growth in Q3?
• How might inflation readings alter BoE policy this autumn?
• Are consumer fears fading or structural pressures persisting?

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