UK businesses report strongest activity in a year during August

British businesses are having their strongest month in a year thanks to a rebound in the dominant services sector, according to a survey that suggests Britain's economy is continuing to outperform those of other European countries.

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The preliminary S&P Global UK Composite Purchasing Managers' Index for August - published on Thursday - is welcome news for finance minister Rachel Reeves who has struggled to meet her promise to voters to speed up the economy.

But its suggestion of stronger inflation pressure might worry the Bank of England.

Sterling jumped by a fifth of a cent against the US dollar as investors saw the unexpectedly strong reading as lessening the case for another BOE interest rate cut during 2025.

The PMI, covering manufacturing as well as services, picked up to 53.0 - its highest since August last year - from a final reading of 51.5 in July.

A Reuters poll had forecast only a small increase to 51.6.

By comparison, Germany's PMI grew more slowly while in France activity remained below the growth threshold.

Britain's economy posted the strongest economic growth within the Group of Seven large, rich nations in the first half of 2025, albeit at a pace which was slow by historic standards.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey suggested economic growth had accelerated over the summer after a sluggish spring.

"It's evident from survey measures of order books, however, that the demand environment remains both uneven and fragile," Williamson said.