The S&P Global UK Composite Purchasing Managers’ Index rose to 53.9 from 51.4 in December, marking the highest level since Prime Minister Keir Starmer’s Labour government took office.
That was better than all forecasts in a Reuters poll of economists that had pointed to a reading of 51.5.
Data company S&P Global said the survey pointed to a quarterly rate of economic growth of around 0.4% – something that will cheer finance minister Rachel Reeves following a second tax-raising budget announced in November.
While the dominant services sector led the upswing, manufacturers enjoyed their best month since August 2024 with order books expanding at the fastest pace in almost four years.
“UK businesses kicked up a gear in January, showing encouraging resilience in the face of recent geopolitical tensions,” said S&P Global chief business economist Chris Williamson.
But there were some parts of the survey that could concern members sitting on either side of the Monetary Policy Committee’s debate on whether to cut interest rates again.Financial markets currently show only a small chance of an interest rate cut next month, with a 0.25 percentage point reduction fully priced for mid-2026.
Employment in the services sector contracted at a faster rate in January, while output price inflation picked up to a nine-month high, the PMI showed.
“High staffing costs were meanwhile again widely reported as a key cause of higher selling prices, hinting at an intensification of price pressures at a level above the Bank of England target,” Williamson said.
The PMI for the services sector rose to 54.3 from 51.4, the highest reading since April 2024. Optimism hit its highest level since September 2024, the month before Reeves announced sweeping tax increases for employers.
The manufacturing PMI rose a full point to 51.6, its highest reading since August 2024. Export orders expanded for the first time in nearly four years.
