UK private sector growth hits six-month high in boost for Reeves – business live | Business

UK private sector output growth has climbed to a six-month high. in March, in a pre-Spring Statement boost for chancellor Rachel Reeves.

While British manufacturing output is sliding this month, the services sector is growing at a faster rate.

This services rebound has lifted the UK PMI Composite Output Index, which tracks activity in the economy, up to 52.0, the highest since last September, up from 50.5 in February.

S&P Global, which compiles the PMI report, says that service sector growth was bolstered by renewed improvements in both domestic and overseas sales.

But manufacturers were hit by “severe headwinds”, including rising global economic uncertainty and potential US tariffs.

The report says:

Weak international demand resulted in the fastest decline in manufacturing export sales since August 2023. Moreover, manufacturers reported the steepest downturn in production volumes for nearly one-and-a half years.

Here are the details:

• Flash UK PMI Composite Output Index: 52.0 (Feb: 50.5). 6-month high.

• Flash UK Services PMI Business Activity Index: 53.2 (Feb: 51.0). 7-month high.

• Flash UK Manufacturing Output Index: 44.6 (Feb: 47.3). 17-month low.

• Flash UK Manufacturing PMI: 44.6 (Feb: 46.9). 18- month low.

The report also shows that private sector employment is fallling in March for the sixth month running.

Companies cited business restructuring, investments in automation and the non-replacement of leavers in response to rising payroll costs – a sign that Reeves’s increase to employers’ national insurance rates, and the minimum wage, is hitting workforce levels.

Chris Williamson, chief business economist at S&P Global Market Intelligence said:

“An upturn in business activity in March brings some good news for the government ahead of the Chancellor’s Spring Statement, offering a respite from the recent flow of predominantly downbeat economic data. However, just as one swallow does not a summer make, one good PMI doesn’t signal a recovery.

The signal from the flash PMI is an economy eking out a modest expansion in March, consistent with quarterly GDP growth of just 0.1%, but with employment continuing to be cut thanks to concern over costs and the uncertain outlook. Confidence is still running close to January’s two-year low.

Williamson cautions that the improvement is also being driven by only small pockets of growth, notably in financial services, with consumer-facing business and manufacturers continuing to struggle against headwinds both at home and abroad.

He adds:

These headwinds include the additional costs imposed on businesses in the Budget, low confidence among businesses and households, and sluggish demand at home and abroad, the latter linked to heightened geopolitical uncertainty resulting from US tariff policies.

Worryingly, these headwinds are likely to grow in force as higher National Insurance contributions come into effect in April, coinciding with the anticipated review of US tariff policy on 2nd April, the latter having the potential to further subdue global economic growth and dampen UK trade.”