The UK private sector recorded its strongest expansion in six months in March, driven by a significant acceleration in services activity, according to flash data released by S&P Global on Monday. The Flash Composite Output Index rose to 52.0 in March, up from 50.5 in February, signaling the fastest pace of growth since September 2024.
The index has now remained above the key 50.0 threshold—marking expansion—for the seventeenth consecutive month. The latest reading points to a resilient services economy, which helped counterbalance weakness in manufacturing output.
March’s upturn was largely attributed to the services sector, with the Services Purchasing Managers’ Index (PMI) climbing to a seven-month high of 53.2, up from 51.0 in February. This figure exceeded expectations, reflecting robust demand and improved business activity.
On the other hand, manufacturing continued to face challenges. The Manufacturing PMI fell to 44.6 in March, its lowest level in 18 months, down from 46.9 in February and well below the forecast of 47.3. This marked the sharpest decline in manufacturing production since October 2023.
New order trends diverged across sectors. Manufacturers reported a sharp export-driven fall in sales, while service providers saw an increase in new business — the first uptick of the year— highlighting continued demand in domestic services.
Despite the improved output, private sector employment declined for the sixth consecutive month in March. Survey participants attributed the job losses to cost-cutting measures, business restructuring, investments in automation, and hiring freezes due to rising payroll costs.
Input cost inflation continued to ease after peaking in January, while output price inflation remained steady from the previous month, suggesting a slightly more stable cost environment for businesses.
Business confidence for the year ahead remained subdued, hovering near the 25-month low observed in January. Manufacturing sentiment dropped to its weakest level since November 2022, whereas optimism among service firms improved to a five-month high.
Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “An upturn in business activity in March brings some good news for the government ahead of the Chancellor’s Spring Statement, offering a respite from the recent flow of predominantly downbeat economic data.” However, he cautioned, “Just as one swallow does not make a summer, one good PMI reading does not signal a full recovery.”
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