UK Business Activity Hits Eight-Month High in October as New Orders and Hiring Rebound

LONDON: British businesses are having their strongest month since February, helped by rising new orders and growing demand linked to artificial intelligence, according to a closely watched survey published on Friday.

The preliminary S&P Global UK Composite Purchasing Managers’ Index (PMI) rose to 53.1 in October from 52.0 in September. The reading was higher than any forecast in a Reuters poll of economists and adds to evidence that the economy is holding up against the energy price shock caused by the Iran war. A reading above 50 indicates growth.

Both main sectors gained momentum. The services business activity index rose to 53.1 from 52.1. Manufacturing output grew at its fastest pace in more than two years, and the headline manufacturing PMI rose to a five-month high of 52.8 from 51.9. New orders across the private sector increased at the sharpest rate in 25 months, and some companies attributed higher sales to AI-related investment and stronger demand for technology services.

For the first time since September 2024, private sector employers added staff. Hiring had been falling since the tax increases in the 2024 Budget delivered by then-Chancellor Rachel Reeves, and October’s increase adds to other signs of a recovering labour market.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the UK economy had gained momentum in October. He added that some firms had held back spending ahead of next week’s Budget, so growth could strengthen further if Chancellor John Healey avoids measures that hurt business.

Inflation pressures remained a concern. Input costs rose at their fastest rate since June, driven mainly by higher energy prices and sharp increases in manufacturing. Williamson said the strength of price pressures made a Bank of England interest rate rise at its upcoming policy meeting a near certainty and increased the chance of further increases in 2027.

Business confidence for the year ahead improved slightly but stayed below its long-term average. Companies cited concerns about the wars in Ukraine and the Gulf and about higher borrowing costs.

The survey data were collected between October 12 and October 21.