British businesses have extended their early 2026 rebound into a second month. However, jobs are still being sharply cut among service firms. According to survey results, this downturn is partly the result of higher taxes imposed by the Labour government.
The S&P Global UK Composite Purchasing Managers’ Index (PMI) rose to 53.9, as reflected in a preliminary report for February. This marked a marginal increase from 53.7 in January and represents the highest level in two years, last seen in April 2024, before Prime Minister Keir Starmer’s government took office.
The early PMI data for February brings further signs of an encouraging start to the year for the UK economy, said Chris Williamson, S&P Global’s Chief Business Economist.
PMI readings above 50.0 indicate growth in business activity, while readings below that midpoint signal contraction.
Williamson added that surveys for both January and February echoed other signs of a pickup among businesses and consumers after uncertainty in the run-up to Finance Minister Rachel Reeves’ budget in late November 2025. This trend is consistent with economic growth of about 0.3% in the first quarter of 2026.
This would be stronger than the modest expansion of just 0.1% recorded in the final quarter of 2025.
Williamson noted that Bank of England (BoE) policymakers will be encouraged by signs of stronger economic growth. However, relatively modest price pressures and ongoing concerns about labour market weakness are likely to fuel calls for further interest rate cuts.
Investors largely expect the BoE to resume cuts to borrowing costs in March 2026, as the central bank takes comfort from signs of slowing inflation and shifts its focus toward weakness in the employment market.
Prices charged by businesses climbed at the fastest pace since April 2024. However, cost burdens, while still elevated, increased at the slowest pace in three months.
