UK SERVICES SECTOR HITS SIX-MONTH HIGH DESPITE ENERGY RISK

Developing story: PMI revisions, inflation data, Bank of England commentary and budget assumptions may change the economic outlook.

Britain’s services sector unexpectedly strengthened in August, adding to signs that the economy is more resilient than forecasters had expected despite energy-price pressure from the Middle East conflict. Reuters reported that the S&P Global Flash UK Services Purchasing Managers’ Index rose to 52.8 from 52.1 in July, reaching a six-month high.

The reading was stronger than every forecast in a Reuters poll, which had pointed to a decline to 51.8. Because services make up the largest share of the U.K. economy, a better-than-expected services PMI can shift expectations for growth, tax receipts and Bank of England policy.

S&P Global said the survey was consistent with economic growth of around 0.3 percent in the third quarter. That would be close to the second-quarter outturn and would support Prime Minister Andy Burnham and finance minister John Healey as they try to show the economy remains on a stable footing before the October budget.

The details were not uniformly positive. Manufacturing cooled to a five-month low of 51.5, while employment in services continued to decline, though at the slowest pace since last October. The composite PMI, combining services and manufacturing, still rose to a four-month high of 52.5.

Energy prices remain a complication. Reuters reported that the survey’s input and output price gauges partially rebounded in August after falling in July, reflecting the rise in global energy prices in recent weeks and the lack of a clear end to the Iran war. That keeps inflation risk alive even as activity improves.

For the Bank of England, the data make the policy path harder. Stronger growth reduces the case for emergency support, while higher price pressures argue against an easy turn toward lower rates. Economists cited by Reuters said the central bank is likely to maintain a cautious, hawkish bias while waiting for clearer growth and inflation signals.

Business optimism also improved, reaching a seven-month high among services companies. That matters because investment, hiring and pricing decisions can be shaped by confidence as much as current sales. If companies see stronger domestic demand, they may keep spending despite geopolitical risk.

What is confirmed is that the U.K. services PMI rose to a six-month high and beat expectations. What remains unresolved is whether services strength can offset weaker manufacturing and whether energy-driven price pressure forces the Bank of England to keep borrowing costs higher for longer.

Fact-check date: August 21, 2026. Article type: News. Sources: Reuters; S&P Global; Bank of England. Developing note: PMI revisions, inflation data, Bank of England commentary and budget assumptions may change the economic outlook.