Financial News: UK Private Sector Logs Marginal Contraction

UK Private Sector Logs Marginal Contraction

05/22/2025 - 08:14:00 (RTTNews)

(RTTNews) - The UK private sector activity deteriorated for the second straight month in May, though marginally, flash survey data from S&P Global revealed on Friday.

The flash composite output index rose to 49.4 in May from 48.5 in April. The expected score was 49.3. However, any reading below 50 indicates contraction in the sector.

A frictional rise in service sector activity helped to offset the fastest downturn in manufacturing production since October 2023, the survey said.

The overall reduced levels of business activity were mostly attributed to subdued order books and caution among clients amid rising business uncertainty.

New orders received by the British private sector fell at the fastest pace in two-and-a-half years, linked to a reduction in non-essential spending and delayed investment decisions among clients.

New export orders also fell at a solid pace in May due to the negative impact of US tariffs on export sales along with general uncertainty about global trade conditions.

Private sector employment showed a further decline in May amid a mixture of redundancies, restrictions, hiring freezes, and the non-replacement of voluntary leavers.

On the price front, cost burdens remained sharp in May, although the rate of inflation eased considerably from April's 26-month high. The overall inflation was driven by wage pressures, higher utility bills, shipping costs, and charges for technology services. Output price inflation eased to its lowest so far in 2025.

Looking ahead, business confidence rose to the highest level in five months, driven by the service economy, with service providers commenting on more stable global financial market conditions and a cautious recovery in spending plans among clients.

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