The UK's private sector saw a marked acceleration in growth this December, buoyed by a significant influx of new business following the autumn Budget, according to the latest flash survey data. However, this positive momentum continues to be overshadowed by persistent job losses across the economy.
PMI Data Reveals Strongest New Work Upturn in Over a Year
The preliminary S&P Global UK composite Purchasing Managers' Index (PMI) rose to 52.1 in December, up from 51.2 in November. Any reading above the neutral 50.0 mark indicates expansion, signalling a faster pace of growth as the year concludes.
Most notably, the survey indicated the strongest increase in new orders for companies in 14 months. This resurgence was primarily driven by improved demand within the vast services sector. Businesses reported that client confidence, which had weakened in the run-up to the Budget, had recovered.
In a further encouraging sign, new work from overseas also expanded, ending a 13-month sequence of decline.
Post-Budget Confidence Lifts Uncertainty, But Job Cuts Continue
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, described the figures as "welcome news on faster economic growth at the end of the year." He stated that companies were "buoyed in part by the post-Budget lifting of uncertainty," a stark contrast to the gloom that followed the previous year's fiscal statement.
"It’s a big relief that business confidence has not slumped in a repeat of last year’s post-Budget gloom," Williamson commented. "Instead, companies have ended the year on a slightly more optimistic note amid signs of improving demand."
Despite this uplift, the report contained a significant caveat. Staffing numbers decreased for the 15th consecutive month in December, with the service sector particularly affected. Survey respondents frequently cited intense cost pressures as the reason for reducing headcount.
Growth Remains Patchy as Rate Decision Looms
Williamson cautioned that the expansion remains uneven. "The growth in output among private companies was still very dependent on technology and financial services activity, with many other parts of the economy struggling to grow or in decline," he noted.
He also expressed concern over the ongoing job market weakness, adding, "Job losses are again worryingly widespread, and it remains to be seen whether the uptick in orders during December will persuade more companies to start hiring again."
The economist suggested this mixed picture of "sluggish growth and worrying jobs data" makes it likely the Bank of England will move to cut interest rates in a bid to provide further stimulus to the economy. The flash PMI data is based on preliminary survey results and is subject to revision when the final figures are published.
