London Daily

Focus on the big picture.
Thursday, Aug 27, 2026

UK economy 'running on empty' as recession signals mount - PMI

UK economy 'running on empty' as recession signals mount - PMI

Britain's economy is showing signs of stalling as high inflation hits new orders and businesses report levels of concern that normally herald a recession, a closely watched industry survey showed on Thursday.

S&P Global's Purchasing Managers' Index (PMI), covering services and manufacturing firms, also showed companies raising pay and passing higher costs on to clients, a worry for the Bank of England.

The PMI's preliminary composite index held at 53.1 in June, above the median forecast of 52.6 in a Reuters poll of economists and unchanged from May.

But its measure of new orders fell to 50.8, the lowest in over a year. Factory orders dipped below the 50.0 growth threshold to 49.6.

"The economy is starting to look like it is running on empty," Chris Williamson, chief business economist at S&P Global Market Intelligence, said.

"Business confidence has now slumped to a level which has in the past typically signalled an imminent recession," he said, adding that the economy was likely to show a fall in output in the second quarter that could deepen in the third quarter.

Economies around the world are struggling with similar problems and sterling rose against the euro after a similar survey showed a sharp slowdown in business growth in the single currency area, and the pound recovered some of its earlier losses against the U.S. dollar.

Some analysts said the report, while not yet reflecting the full impact of the cost-of-living crisis, provided a bit of hope that a recession might be avoided.

"For now, the survey offers some reason to think the economy could be a little more resilient than we thought," Nicholas Farr, an economist at consultancy Capital Economics, said.

But others worried about the signs of demand growth petering out and the still high inflation pressures.

Samuel Tombs at Pantheon Macroeconomics said he continued to expect Britain's economy would shrink in the April-June period, albeit partly due to an additional public holiday.

"We still are content with our forecast for a 0.7% quarter-on-quarter decline in GDP in Q2 and only a partial recovery in Q3," he wrote in a note to clients.

The PMI's business expectations index fell by 4.6 points in June, the largest monthly decline since the start of the COVID-19 pandemic, with manufacturers and service providers both reporting their lowest business optimism levels since May 2020.

Separate data showed the limits on finance minister Rishi Sunak for spending more money or cutting taxes to stimulate the economy, as rising inflation-linked debt interest costs pushed the public finances deeper into the red than expected in May.

Inflation is also hitting spending by consumers and figures from the Confederation of British Industry showed retailers - who are not included in the PMI surveys - were feeling the hit this month.

The PMI's measure of job creation was the strongest in three months, in the latest sign of the strength in the labour market.

But employers reported difficulty finding staff and pay levels rose. That helped keep increases in prices charged by firms near two-decade highs.

Companies across the board felt the need to pass on higher energy, fuel and wage costs to customers, S&P Global said.

The BoE is worried that the recent jump in inflation to a 40-year high of 9.1% in May might turn into a permanent problem for the British economy. It said last week it was ready to act "forcefully" if it saw signs of persistent inflation pressures.

Newsletter

Related Articles

0:00
0:00
Close
TSA Unveils Major Airport-Security Overhaul as It Drops Gold+ Privatization Plan
CIA Chief Warned Russia Against Attacking NATO in Secret Moscow Mission
Raheem Sterling Charged With Dangerous Driving After Lamborghini Crash
The Secret Dolly Parton Kept Until Her Death: "She Was Much Sicker Than She Let On"
Middlesbrough House Fire Kills Woman and Seven-Year-Old Girl
Prince Harry and Meghan Markle Return to UK Amid Renewed Media Attention
Raheem Sterling Charged With Dangerous Driving After London Collision
Greenpeace Threatens Legal Action Over Crown Estate Offshore Wind Leasing
Nvidia Revenue Surges to Ninety-Six Point Two Billion Dollars on Artificial Intelligence Demand
Meta Agrees to Global Youth Safety Changes Following Multi-State Legal Settlement
UK Government Plans Autumn Summit With Scottish, Welsh and Northern Irish Leaders
CMA Caps Veterinary Prescription Fees at Twenty-One Pounds
Thames Water Pilot Records Forever Chemicals at Thirteen Times the Legal Limit
Kent Meningitis Outbreak Reaches Thirty-Four Confirmed Cases
Forty Children Missing From UK Asylum Accommodation Remain Unaccounted For
UK Court Upholds VAT on Private School Fees
US Designates Palestine Action as Foreign Terrorist Organization
UK Approves Massive New Chinese Embassy Complex in London Amid Security Concerns
Prime Minister Andy Burnham Visits Kyiv and Offers Cruise Missile Designs to Ukraine
Glacier Collapse, Not Earthquake, Triggered Deadly Nepal-Tibet Flood
Andy Burnham Drops Plan to Cap Political Donations
Conservative Leadership Contest Intensifies as Robert Jenrick Attacks Kemi Badenoch
French-Born Defence Secretary Wes Streeting Condemns Homophobic Abuse Since Taking Office
UK Government Delays Commercial Robotaxi Rollout in London Over Regulatory Gaps
NHS Complaints About Autism and ADHD Care Waiting Times Triple Over Five Years
UK Government Launches 10,000 Work Placements for Young People With Sainsbury's
NHS England to Offer Free At-Home Cervical Cancer Screening Kits
EU Biometric Border Checks Cause Delays of Up to Five Hours for British Travellers
US Imposes Economic Sanctions on UK-Based Protest Group Palestine Action
Two Planned UK Datacentres Could Produce More Annual Carbon Emissions Than ExxonMobil's Entire UK Operation
London Surgeons Complete First Artificial Intelligence-Assisted Brain Tumour Removal
UK Services Growth Rebounds as Consumer Confidence Reaches Two-Year High
Ofgem Confirms Four Percent October Energy Price Cap Increase for UK Households
Government Considers Insolvency Law Changes to Bring Thames Water Into Public Ownership
Andy Burnham Signs Artificial Intelligence Defence Pact During Visit to Kyiv
Church of England Faces Renewed Scrutiny Over Historical Safeguarding Failures
Reform UK Proposes £30 Tax Credit for Long HMRC Telephone Queues
Greater Manchester Secures More Than £100 Million to Upgrade Victorian Railway Stations
East Midlands Railway Urges Essential Travel Ahead of Bank Holiday Strikes
UK Economy Grows 0.4 Percent in Second Quarter as Global and Energy Pressures Weigh
UK Government and Sainsbury’s Launch Plan for 10,000 Youth Work Experience Placements
Scottish Government Plans Tighter Remote-Working Rules and Possible Voluntary Redundancies
Scottish Budget Faces More Than £700 Million Reduction After Tax Revenue Adjustment
Nearly 100 Labour MPs Press Andy Burnham to Back Electoral Reform Commission
UK Energy Price Cap Rises Four Percent to £1,723 as Middle East Conflict Drives Wholesale Gas Costs
Turnbull Warns AUKUS Could Leave Australia Without Promised Nuclear Submarines
California Billionaires Pour More Than $150 Million Into Fight Over Proposed Wealth Tax
German Broadcaster Goes Dark to Warn AfD Could End Its Saxony-Anhalt Service
Badenoch Plans Major Shadow Cabinet Reshuffle as Tories Struggle in Third Place
UK Government Demands Action Against Social Media Content Promoting Dangerous Driving
×