‘Sluggish' UK business activity picks up as tariff threat eases
The strengthening service industry helped offset a persistent slump in manufacturing in June.
The S&P Global flash UK composite purchasing managers' index (PMI) reported a reading of 50.7 in June, up from 50.3 in May.
The flash figures are based on preliminary data. Any score above 50.0 indicates that activity is growing while any score below means it is contracting.
The volume of new business returned to growth in June, ending a six-month period of contraction, the survey found.
This was primarily driven by the service sector – the largest part of the UK's economy, spanning industries including hospitality, entertainment and culture, finance and real estate.
A further slight expansion of activity in the sector was contrasted by another drop in production for manufacturers, led by a decline in overseas export orders.
Concerns over the impact of Donald Trump's tariffs on US imports were partly behind the slump, despite some businesses saying confidence had improved as a result of the President striking new trade deals with countries including the UK.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the UK economy was in a 'sluggish state' in recent weeks.
'Although business conditions have continued to improve since April's downturn, quelling recession fears, growth of business activity remains disappointingly lacklustre, indicative of second quarter GDP (gross domestic product) rising at only a 0.1% quarterly pace,' he said.
'Business confidence also remains in the doldrums compared to this time last year, losing ground again in June.
'On top of concerns over the impact of recent government policies and worries over global trade protectionism, June's data collection coincided with increased tensions in the Middle East.
'Employment has hence continued to be cut as firms grapple with the combination of higher staffing costs, linked to last autumn's budget, lower demand and subdued confidence.'
The survey showed that hiring continued to be squeezed throughout the month, with employment across the private sector decreasing for the ninth month in a row and at a faster pace than May.
Businesses surveyed said they had been making cutbacks to their workforce through hiring freezes and redundancies.
But Elliott Jordan-Doak, senior UK economist for Pantheon Macroeconomics, pointed out that 'businesses were more optimistic about the future in June than in May, suggesting the economic outlook is improving'.
'Domestic activity is proving more resilient than external demand, consistent with Mr Trump's tariff threats weighing on cross-border trade,' he added.
'All told, the PMI suggests that business confidence is staging a fragile recovery after being battered by tariff threats and tax increases.
'That said, rising geopolitical stress is likely to be added to the growing list of worries facing businesses.'
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