Economic Buzz: UK private sector contracts for second consecutive month in June
The S&P Global Flash UK PMI Composite Output Index fell to 49.4 in June from 49.7 in May, remaining below the 50.0 no-change mark and signalling a marginal decline in overall business activity.
The downturn was largely driven by the services sector, where higher costs and weaker customer confidence weighed on activity. Businesses linked these challenges to the conflict in the Middle East and domestic political uncertainty. The decline in services activity was the joint-sharpest since the beginning of 2021 (alongside January 2023).
Manufacturing output continued to expand, supported by temporary demand from customers building inventories ahead of expected price increases. Manufacturing production grew at its fastest pace since September 2024. However, growth in manufacturing new orders slowed to a six-month low, indicating that the boost from advance purchasing may be fading. Overall new business volumes fell at the fastest rate in 14 months, resulting in the sharpest decline in total private sector sales since April 2025. Backlogs of work also fell at the quickest pace in seven months.
Companies continued to reduce staffing levels, extending the current period of job cuts to 21 consecutive months. While employment declined sharply in services, manufacturing firms increased hiring to meet short-term demand.
Input cost inflation eased for the second consecutive month but remained elevated. Businesses reported higher costs for energy, chemicals, metals, IT hardware, shipping and labour. Output prices also continued to rise, although at a slower pace than in May.
Supply chain pressures persisted, with 27% of manufacturers reporting longer delivery times in June, compared with 4% reporting improvements.
Business confidence for the next 12 months improved from May?s recent low but remained below levels seen before the Middle East conflict. Firms cited hopes of reduced supply disruptions, stronger investment and a recovery in demand, while inflation, geopolitical uncertainty and weak consumer spending continued to pose risks to growth.
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