UK business activity picked up to its fastest speed in a year in August, while the government borrowed less than economists had projected for July, offering a slight lift to the public finances even as growth slows and hiring stays soft.
The S&P Global UK Composite Purchasing Managers’ Index rose to 53 in August from 51.5 in July. Readings above 50 points to expansion, and August marked a fourth straight month in that zone.
The gain was led by stronger demand in business services, where firms reported a clearer rise in new work. The UK’s manufacturers also reported better sentiment, but services set the pace and carried the overall index higher compared with the previous month.
On the public finance side, separate figures released on Thursday showed the central government borrowed £1.1 billion in July. That was smaller than the Office for Budget Responsibility’s expectation of a £2.1 billion deficit for the month.
The gap was narrower than forecast, giving the Treasury slight relief as it deals with weaker-than-hoped revenues and a recovery that has not been even across sectors and regions.
Budget choices remain tight. Chancellor Rachel Reeves is still widely expected to lift taxes in the Budget to pay for plans and to meet her rule to cover day-to-day spending from tax receipts by 2029-30. Officials are weighing different paths, including potential changes to property taxes, as ministers face a hole of at least £20 billion in the public accounts that will need to be closed.
Growth has cooled. Headline GDP expanded by 0.3% in the second quarter, down from 0.7% in the first three months of 2025. On the other hand, the US economy rebounded with 3% annualized GDP growth in Q2, as reported by Cryptopolitan recently. Companies have said that expected tax rises and a steep increase in the minimum wage are hurting confidence, pushing up costs and leading managers to hold back on recruitment.
Hiring remained weak despite strong business activity
Employment measures fell for an eleventh month in a row. Many companies are reporting reduced hiring and layoffs. At the same time, new vacancies have been unfilled, which suggests that companies are cautious when hiring new talent.
The latest Office for National Statistics release also showed that July borrowing was the lowest for that month in three years. Borrowing typically dips in January and July because those months line up with key dates for income-tax payments. That seasonal pattern reflects the calendar of taxpayer deadlines and was visible again this year.
July’s total was helped by a £2.7 billion rise in self-assessed income-tax receipts and by interest payments on government debt coming in lower than expected. Revenues also picked up after the decision in October to raise employer national insurance contributions; the OBR said those payments were almost 24% higher than in July last year, boosting the monthly intake.
Even with the July undershoot, the broader picture is still fragile. From April to July, the first four months of the fiscal year, borrowing reached £60 billion. The running total is broadly in line with the OBR’s forecast published in March.
The watchdog will issue fresh projections for growth and the public finances alongside the Budget. The Treasury is preparing for the risk that the OBR trims its productivity outlook, a change that would likely push borrowing higher.
On the fiscal rule measure, the current budget deficit, excluding investment spending, stood at £42.8 billion for the year to date, £5.4 billion more than in the same four months of 2024 and £5.7 billion above the OBR’s profile for the period.
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Source: https://www.cryptopolitan.com/uk-business-activity-reached-its-fastest-pace-in-a-year/