The º£½ÇÊÓƵ economy is poised for a rebound after enduring a challenging period marked by soaring energy costs and hikes in employment taxes, according to recent data.
S&P Global's latest flash purchasing managers' index (PMI) indicates that the º£½ÇÊÓƵ's services sector experienced modest growth in output during May, while the decline in manufacturing activity appears to be softening, as reported by .
However, it may be premature to conclude that º£½ÇÊÓƵ businesses have fully weathered the storm of cost pressures from what has been termed 'Awful April.'
According to feedback gathered by S&P Global researchers, the erratic nature of President Trump's trade policies is casting a shadow over business confidence, with a noticeable dip in business activity attributed to clients' reluctance to place orders for services.
The composite PMI figure came in at 49.4, marginally below S&P Global's neutral 50-figure threshold, indicating a stagnation in output. Uncertainty surrounding global economic policies has led to the sharpest drop in new work across the private sector in two and a half years.
Additionally, private sector employment numbers continued to decline due to redundancies, the non-replacement of staff who voluntarily leave, and hiring freezes, all contributing to reduced workforce numbers within the º£½ÇÊÓƵ economy.
Chris Williamson, chief business economist at S&P Global, remarked that businesses experienced a "milder May" following the difficulties faced in "awful April."
"Business confidence has rebounded from April's recent low, which had seen confidence collapse to a degree not seen since the Truss Budget of 2022, and price pressures have moderated after spiking higher," Williamson remarked. He also noted that "Sunny weather also provided a welcome boost to business activity in some parts of the economy."
Further elaborating on the situation, Williamson pointed out that flash data for May, sourced from a survey of over 1,200 firms, indicates that easing cost pressures "keeps the door open for further interest rate cuts in the coming months."
º£½ÇÊÓƵ economy battles with low growth
In a distinct survey conducted by the Confederation of British Industry (CBI), it was found that manufacturing output volumes dipped in the three months leading to May, while inflation expectations continue to hover above the long-term average.
Ben Jones, CBI's lead economist, reflected on the survey of 281 manufacturers which showed that sentiment in the sector "remains poor", adding that more effort is needed in finalising trade agreements to "shift the dial."
Firms are now looking forward with optimism that Chancellor Reeves will remain true to her pledge to accelerate the º£½ÇÊÓƵ's economic growth through the introduction of pro-business measures.
With eyes turned towards the government, businesses await announcements regarding an industrial strategy and the forthcoming spending review scheduled for mid-June.
In the absence of spending cuts by Reeves, economists speculate that businesses could end up bearing the brunt of higher tax burdens as half of Reeves' financial leeway might have been eroded by soaring borrowing costs and her steadfast pledge to avoid hiking major taxes on 'working people.'
Matt Swannell, top economic adviser at the EY ITEM Club, shared an optimistic forecast stating his belief that GDP growth will "comfortably remain in positive territory" throughout Q2 following an impressive 0.7 per cent surge in the first quarter.
