The UK economy has contracted for a second straight month, according to fresh survey data, underscoring mounting pressure on businesses as growth momentum weakens heading into the second half of 2026.
The latest figures from the S&P Global flash purchasing managers’ index (PMI) show that overall business activity slipped further below the 50-point threshold that separates expansion from contraction. The reading suggests that both services and parts of manufacturing are struggling to maintain output amid weakening demand and persistent cost pressures.
Economists say the decline reflects a broad slowdown across the private sector, with new business orders falling and firms reporting reduced client spending. Services—traditionally the largest driver of UK growth—have been particularly affected, with activity weakening at a pace not seen since early 2023. Businesses also reported softer hiring intentions, indicating that labour market conditions may cool further in the coming months.
Manufacturing has provided only partial support to the economy. While production has shown some resilience in recent months, firms continue to face volatile global demand and supply chain disruptions. Some manufacturers have also reported that recent output gains were driven in part by precautionary stock-building rather than sustained end-demand, raising questions about the durability of the sector’s recovery.
Inflationary pressures remain a complicating factor. Companies continue to report higher input costs linked to energy, materials, and wages, even as demand weakens. This combination—slowing growth alongside sticky inflation—has added to concerns about the UK’s economic outlook and the policy challenge facing the Bank of England.
Despite the downturn, analysts note that monthly PMI data can be volatile and may not fully capture underlying trends. Earlier official figures still showed modest growth in the first quarter of the year, but recent surveys suggest that this momentum has faded as the economy enters a more fragile phase.
Overall, the data points to an economy losing momentum, with both businesses and policymakers facing a difficult balance between supporting growth and controlling inflation.
