The UK’s private sector output grew marginally in January as employment was pushed lower amid ongoing concerns over higher national insurance contributions that many employers will have to start paying from April.

The flash UK purchasing managers’ composite output index improved to 50.9 in January from 50.4 in December. Rising above the neutral 50-points mark separating growth from contraction, it indicates activity growth accelerated in January.

It outperformed the FXStreet-cited consensus, which expected the index to decrease to 50.0 in January.

The flash UK services PMI business activity index ticked up to 51.2 in January from 51.1 in December, beating the FXStreet-cited consensus again, which had factored in a slowdown in growth to 50.6 in January.

The flash UK manufacturing output index increased to 49.3 in January from 45.9 in December.

The flash UK manufacturing PMI rose to 48.2 in January from 47.0 in December. This was above the FXStreet-cited consensus of 47.1 for January.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘The loss of confidence, combined with widespread concerns over higher staff costs associated with the budget, pushed employment sharply lower again. Barring the job cutting seen during the pandemic, the rate of job losses signalled by the PMI over the past two months has been the highest since the global financial crisis in 2009.’

Further, input price inflation accelerated to its strongest since May 2023, while average prices charged by private sector firms increased at the fastest pace for 18 months in January, S&P Global highlighted.

Looking ahead, S&P Global said: ‘Companies expecting growth over the course of 2025 mostly cited new product launches, the impact of rising technology spending, resilient demand for business services, and planned expansion in overseas markets. Meanwhile, those forecasting a downturn in business activity during the year overwhelmingly noted unfavourable UK economic prospects, higher employment costs, and a post-budget slump in clients’ investment spending plans.’

The S&P Global flash UK composite PMI is compiled by S&P Global from responses to questionnaires sent to survey panels of around 650 manufacturers and 650 service providers. The responses were collected between January 9 and 22.

Final January data for manufacturing will be published on February 3, with services and composite indicators to follow on February 5.

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