Activity in the UK’s services sector rose to a 16-month high in August as businesses enjoyed bigger workloads and rising sales at home and overseas, new figures show.
The S&P Global UK services PMI survey scored 54.2 last month, up from 51.8 in July and the highest reading since April 2024.
Any reading above 50.0 means the sector is growing, while any score below means it is contracting.
The closely-watched survey pointed to a rebound in output and new work for businesses in the sprawling services sector – which includes hospitality, property, healthcare and education.
This was supported by rising sales both in domestic and overseas markets, particularly in the EU and the US, with new export orders rising for the first time since March.
Respondents of the survey indicated that concerns about the impact of US tariffs – which were laid out by US president Donald Trump in April – had eased last month.
It follows the UK reaching a trade agreement with the US to minimise the impact of tariff changes, as well striking new deals with India and the EU.
Tim Moore, economics director at S&P Global Market Intelligence, said: “August data highlights a welcome acceleration of output growth and a swift rebound in order books after July’s dip, leaving the UK service economy on a much stronger footing as the end of summer comes into view.
“Improved sales pipelines, lower borrowing costs and receding fears about US tariffs all helped to boost business optimism.
“However, many service providers still commented on elevated Government policy uncertainty and worries about forthcoming tax-raising measures expected in the autumn Budget.”
The latest data showed anecdotal evidence of a lack of investment spending among some businesses amid uncertainty about economic conditions.
Furthermore, staff numbers dropped for the 11th month in a row as firms continue to respond to higher labour costs.
This marks the longest period of falling employment since 2008-2010, aside from the pandemic, according to the PMI survey.
Many businesses have been freezing hiring, not replacing staff who leave, or making redundancies – while others said they had been focusing more on automation to help offset rising wage bills.
Input costs also increased in August at the fastest rate in three months, as suppliers passed on higher national insurance costs, food prices and technology costs to customers.
Rob Wood, chief UK economist for Pantheon Macroeconomics, said: “Business sentiment recovered sharply in August as firms work through adjustments to payrolls tax hikes and tariff-related uncertainty fades.”
He said the survey suggests businesses had been “recovering” after being “hit hard by those global and domestic shocks in the spring”.
However, the economist said the data puts the Bank of England’s policymakers “in a tricky position, given that inflation is heading to double the 2% target shortly”.
The PMI survey suggests that interest rate-setters will “have to keep policy on hold for the rest of this year at least” in a bid to keep persistent wage and price inflation at bay, he said.
The Bank cut UK interest rates to 4% last month.
