UK economy gains traction in August, underpinned by services sector
By Michele Maatouk
Date: Friday 21 Aug 2026
(Sharecast News) - The UK economy gained traction in August, underpinned by growth in the services sector, according to a survey released on Friday.
The S&P Global flash UK PMI composite output index rose to 52.5 from 52.2 in July, coming in above the 50 mark that separates contraction from expansion for the second month in a row.
The services PMI business activity index ticked up to a six-month high of 52.8 in August from 52.1 the month before.
Meanwhile, the flash UK manufacturing output index dipped to a five-month low of 51.2 this month from 52.9 in July.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK economy picked up a bit more pace in August, adding to signs that we should see solid economic growth of around 0.3% in the third quarter. The expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools. This reflects easing concerns, for now, over the economic impact of the war in the Middle East. Businesses are feeling more upbeat than at any time since the war began. Job losses are also moderating.
"It's clear, however, that the Middle East and concerns over domestic government policy continue to have a damaging effect. Most worryingly, cost pressures remain high, largely due to energy prices and supply disruption linked to the Middle East conflict alongside high staffing costs.
"The data suggest the Bank of England looks likely to keep a hawkish bias but will stay cautious, holding off any rate hikes until the growth and inflation trajectories become clearer."
Jake Finney, senior economist at PwC, said: "The latest PMI data provides increasingly encouraging signs that the economy is finding firmer footing. The composite index has now been solidly in expansion territory for two consecutive months, suggesting that the economy is moving beyond the soft patch seen earlier this year and pointing to reasonably strong growth in Q3.
"While it has faded somewhat from focus, the international backdrop remains volatile and continues to pose the greatest risk to the outlook. Oil prices are once again above $90 a barrel, raising the risk of renewed inflationary pressure, while the PMI data shows that input cost inflation is accelerating.
"Even so, GDP growth is likely to come in slightly above 1% this year, which would be a welcome outcome given the shocks the economy has had to absorb. So far, the economy has proven more resilient than expected, but it is important to bear in mind that we are still a long way away from rip-roaring growth."
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