Britain's private sector grew at its quickest pace since April last month. The S&P Global/CIPS UK Composite PMI, a survey of purchasing managers that measures output across services and manufacturing, rose to 52.5 in August from 52.2 in July, according to figures published this morning by S&P Global. Any reading above 50 points to expansion. The services index, which covers roughly four fifths of the economy, also printed 52.5 against 52.1 in July, a shade below the 52.8 first estimate published on 21 August. Manufacturing went the other way, easing to 51.7, a five month low.
Beneath the headline the picture is uneven. New orders rose for a second month as households and businesses spent more at home, while export sales fell for a sixth month running on subdued European demand. Fuel and transport bills pushed input costs sharply higher, with 31% of firms reporting an increase and fewer than 1% a fall, and enough of that was passed on for prices charged to accelerate for the first time in four months. Service companies cut staff for a twenty third consecutive month, the longest unbroken run since the survey began in 1996, though the pace was the slowest since October. Tim Moore of S&P Global credited spending that "saw further gains after declining during the second quarter of 2026".
For the Bank of England, which sets UK interest rates, firmer output alongside renewed price pressure lands three weeks before a decision. Bank Rate stands at 3.75% and was held there in July on a vote in which three of the nine committee members wanted a quarter point rise. The economy grew 0.4% in the second quarter and August points to something at least as good in the third, while the euro area composite held at 52.0, an eight month high, so there is little to separate the two. Futures markets still price roughly a one in seven chance of an increase on 17 September.
What it means for GBP/EUR
Sterling took no benefit from any of it. GBP/EUR traded around 1.1629, below the 1.1650 to 1.1720 band it held through most of August and well short of the 1.1828 it reached on 15 July. The explanation sits in the bond market rather than the survey: yields on ten year UK government debt have climbed above 5.20%, the highest since 2008, and longer maturities are at levels last seen eighteen years ago, driven by how much the government will need to borrow rather than by where rates are going. The surveys and the gilt market are describing two different countries, and the currency is listening to the gilt market. With the Bank setting both rates and the pace of its gilt sales on 17 September, and a Budget due on 28 October, the pound looks likely to take its direction from fiscal headlines rather than data this autumn. For a business with euro costs to meet before the year end, a forward contract fixes today's rate for a payment due on a future date, which takes both of those dates out of the budget.
