UK business activity expanded at a modest pace in May, according to S&P Global Purchasing Managers’ Index (PMI) data, with overall growth supported by services sector strength but constrained by persistent cost inflation and weakening business confidence.
The UK Composite PMI rose to 52.6, up from 50.3 in the previous reading, signalling a return to moderate expansion in private sector activity. The services sector led the improvement, while manufacturing showed uneven but still positive momentum, keeping overall output above the 50-point threshold that separates growth from contraction.
The Services PMI registered 52.7, reflecting continued expansion in consumer-facing and business service activities. Manufacturing output also remained in expansion territory at an estimated mid-50s reading, though performance across sub-sectors remained inconsistent.
Despite the improvement in headline activity, the data highlighted significant underlying pressures. Firms reported rising input costs across energy, raw materials, logistics, and wages, with inflationary pressure continuing to build across supply chains. In several industries, cost inflation was described as the most severe constraint on margins since early supply chain disruptions in previous years.
Businesses also reported increasing selling prices, as firms attempted to pass higher input costs on to customers. However, competitive pressures and uneven demand conditions limited full cost recovery, leaving many firms facing margin compression.
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Demand conditions remained mixed. While domestic demand showed signs of stability, export orders remained weak and volatile, reflecting ongoing global uncertainty and subdued international trade momentum. This divergence between domestic resilience and external weakness continues to weigh on manufacturing-linked sectors.
Employment trends were broadly neutral to weak, with many firms indicating cautious hiring behaviour. Recruitment freezes and selective workforce adjustments were reported in response to cost pressures and uncertain demand outlooks.
Business confidence also softened. Survey respondents pointed to concerns over inflation persistence, global trade conditions, and policy uncertainty as key factors limiting forward expectations. While near-term activity remains in expansion territory, expectations for sustained growth were notably weaker than earlier in the year.
The PMI data is compiled from monthly surveys conducted by S&P Global across thousands of UK companies, covering both manufacturing and services sectors. It is widely used by economists and policymakers as a leading indicator of economic momentum due to its timeliness and strong correlation with GDP trends.
Economists typically interpret readings above 50 as expansion. The latest figure of 52.6 therefore signals modest growth, but the narrow margin above the threshold suggests a fragile recovery environment rather than strong economic acceleration.
For manufacturing-intensive supply chains, including textiles and apparel, the data points to a challenging operating environment. Rising input costs, weak export demand, and cautious business sentiment are expected to continue shaping sourcing decisions and production planning in the months ahead.
