Sluggish UK business activity improves, PMI shows, but threats to outlook abound

By Andy Bruce

LONDON (Reuters) -British business activity expanded modestly in June as new orders grew for the first time this year but employers cut jobs more quickly and worried about the conflict in the Middle East, a survey showed on Monday.

The S&P Global UK Composite Purchasing Managers' Index (PMI), a gauge of the private sector economy, rose to 50.7 from 50.3 in May - inching further above the 50.0 growth threshold. A Reuters poll had forecast a rise to 50.5.

The services sector, which dominates Britain's economy, marked its fastest growth in three months. Factory activity dropped for a ninth month running but it was the smallest contraction since January.

Survey company S&P Global said the report was consistent with economic growth of around 0.1% in the April-June period - matching the Bank of England's estimate of the current underlying pace of the economy's expansion.

"The UK economy remained in a sluggish state at the end of the second quarter, according to the early PMI survey data," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

"Although business conditions have continued to improve since April's downturn, quelling recession fears, growth of business activity remains disappointingly lacklustre," Williamson said.

Official data published earlier this month showed Britain's economy slowed sharply in April, reflecting shockwaves from U.S. President Donald Trump's announcement of wide-ranging tariffs and a one-off hit from the end of a tax break on property sales.

The composite PMI's employment, new export business and future output indexes worsened in June, with the latter affected by "elevated global economic and political uncertainty", according to S&P Global.

The new orders index ticked above the 50 growth threshold for the first time since November.

The survey was conducted between June 12 - the day before Israel started to attack sites in Iran - and June 19.

Williamson said the hit to staffing also reflected the increase in employers' social security contributions which finance minister Rachel Reeves introduced in April.

Selling prices increased at the slowest pace since January 2021 - something that will reassure the Bank of England as it monitors an increase in the headline rate of consumer price inflation that it hopes will be temporary.

The PMI for the services sector rose in June to 51.3 from 50.9 in May. The manufacturing PMI rose to 47.7 from 46.4.

(Reporting by Andy Bruce; Editing by Toby Chopra)