UK Business Activity Rebounds as Burnham Vows Support

Key Points

• British business activity rose at its fastest pace in five months in July, according to preliminary data from S&P Global.
• The Composite Purchasing Managers’ Index climbed to 52.1 in July from 49.3 in June, beating every forecast in a Reuters poll.
• A brief pause in the Iran conflict helped ease fuel and raw material costs, giving firms some breathing room on prices.
• Official retail sales figures showed a surprise rise in June, boosted by online shopping, clothing purchases and air conditioning sales during hot weather.
• The GfK consumer confidence index reached its highest level since January, with households more upbeat about the economy’s direction.
• New Prime Minister Andy Burnham has introduced a string of support measures since taking office, including business rate cuts, a bus fare cap and the scrapping of tax on domestic electricity bills.
• Economists warned that the renewed escalation of tensions in the Gulf could reverse recent improvements in cost pressures.
• The Bank of England is expected to hold interest rates at 3.75% next week, with inflation forecast to climb to around 3.5% later in 2026.
• Employment figures in the PMI survey continued a downward trend that began after the 2024 budget raised employer social security contributions.
• Some firms pointed to gains from AI investment spending, though others remain concerned about broader domestic economic uncertainty.

London (Britain Today News) July 24, 2026 – British firms recorded their first rise in activity in three months during July, aided by a brief respite in the Iran war, while consumers grew more confident and increased their spending, according to fresh data that may offer only a short-lived lift to new Prime Minister Andy Burnham. The figures, published on Friday, mark a notable turnaround for an economy that has struggled with geopolitical uncertainty and elevated costs in recent months, though economists caution the improvement may not hold.

What Do the Latest PMI Figures Show About the UK Economy?

The S&P Global UK Composite Purchasing Managers’ Index, which offers a snapshot of activity across services and manufacturing, rose to 52.1 in July from 49.3 in June, according to a preliminary estimate released on Friday. This was the strongest reading since February and came in above all forecasts in a Reuters poll of economists, who had expected a more modest recovery.

Readings above 50.0 signal expansion in business activity, while readings below that threshold indicate contraction. According to the data, S&P’s services PMI rose to 51.8 from 48.8, its strongest showing since April, while the manufacturing equivalent climbed to 52.8 from 52.5. The broad-based improvement across both sectors suggests the recovery in July was not confined to a single part of the economy.

Why Did Business Activity Improve So Sharply in July?

Chris Williamson, chief business economist at S&P Global Market Intelligence, said hospitality firms in particular benefited from a combination of favourable conditions. He said,

“hospitality firms benefited from hot weather, the soccer World Cup and people opting to holiday in Britain as high costs and uncertainty deterred overseas travel.”

This suggests that domestic tourism and leisure spending played a significant role in driving the improved figures, with warm weather and a major sporting event encouraging households to spend closer to home rather than travelling abroad.

Does the Retail Sales Data Support the Positive PMI Reading?

The PMI figures were not the only encouraging data released on Friday. Official retail sales figures showed a surprise increase in sales volumes during June, a rise that was driven by online sales, clothing purchases and a jump in demand for air conditioning units as households sought to cool off during a spell of hot weather.

The retail figures add weight to the broader narrative of a consumer base that, while still cautious, is willing to spend when conditions allow. Combined with the PMI data, the retail numbers point to a UK economy that found some genuine momentum in the early summer months.

How Confident Are UK Consumers Right Now?

Alongside the business and retail data, the GfK consumer confidence index showed that households became the most optimistic they have been since January. The improvement in sentiment was linked to hopes of a broader turnaround in the UK economy, with consumers apparently taking heart from the combination of lower prices at points during July and a change in political leadership.

What Are Economists Saying About the Sustainability of This Recovery?

Not every voice in the market was fully convinced that the improvement would last. Allan Monks, an economist at JPMorgan, said,

“A bunch of timely data for June and July this morning sent a positive message on growth, sentiment and inflation pressures.”

He added a note of caution, saying,

“The caveat is that some deterioration in these metrics is now likely due to recent energy moves and the fading of some temporary influences.”

His comments reflect a wider concern among analysts that the July bounce may prove to be a temporary phenomenon rather than the start of a sustained recovery, particularly given the volatile state of global energy markets.

What Support Has Prime Minister Andy Burnham Introduced Since Taking Office?

Andy Burnham, who became Prime Minister on Monday, has moved quickly to offer additional support to households and businesses. Since taking office, he has announced a cut in business rates for many hospitality firms, a cap on bus fares, and the removal of tax on domestic electricity bills.

These measures appear designed to shore up both business confidence and household spending power at a time when the wider economic picture remains uncertain, and they may have contributed to some of the improved sentiment captured in the July data.

Could the Iran War Reignite Cost Pressures for UK Businesses?

Despite the positive headline figures, there are clear risks on the horizon. Services and manufacturing businesses covered by the PMI reported the weakest combined input price inflation since February, helped by lower fuel and raw material costs as a brief de-escalation in the Gulf conflict pushed oil prices down.

Williamson explained the significance of this shift, saying,

“Price pressures cooled thanks to the lower oil prices seen during the first half of the month, which could strengthen speculation that the Bank of England will hold off raising interest rates.”

However, he did not suggest this trend was guaranteed to continue, given the volatility of the conflict.

What Does This Mean for the Bank of England’s Next Interest Rate Decision?

The Bank of England is widely expected to hold interest rates at 3.75% next week as policymakers assess the impact of the conflict, which has flared up again in recent days. Economists are predicting that inflation will climb later in 2026 to around 3.5%, up from 2.6% in June, which had been its lowest level in more than a year.

This puts the Bank of England in a difficult position, needing to weigh the temporary easing in cost pressures seen in July against the prospect of renewed inflationary pressure should the situation in the Gulf deteriorate further.

How Optimistic Are British Businesses About the Year Ahead?

Business optimism about the year ahead reached its highest level since February, with companies citing relief from geopolitical tensions and the drop in oil prices during the first part of July as key factors behind their improved outlook. This suggests that, for many firms, the recent lull in the Iran conflict provided a genuine sense of relief after a prolonged period of uncertainty.

However, the more recent re-escalation in tensions risks derailing the easing in cost pressures, according to S&P Global, raising questions over how long this improved optimism can be sustained.

Is Artificial Intelligence Investment Boosting the UK Economy?

Some firms pointed to a boost from AI investment spending as a factor supporting their business outlook, suggesting that technology-driven investment is beginning to filter through into broader economic sentiment. Others, however, remained concerned about the broader UK economic outlook and elevated domestic business uncertainty, indicating that the benefits of AI investment are not being felt uniformly across all sectors.
Explore More about Business:
UK Tests Hypersonic Target to Strengthen Air Defence and Support SMEs
British Business Bank’s Annual Profit Triples on Rising Valuations

Why Is UK Employment Continuing to Decline?

One of the more persistent concerns highlighted in the PMI survey was the continued weakness in the employment measure. The survey’s employment gauge extended its continuous decline, a trend that has been in place since the first budget delivered by former finance minister Rachel Reeves in 2024, which included a rise in social security contributions paid by employers.

This ongoing decline in employment indicators suggests that, even as headline activity improves, businesses remain cautious about expanding their workforces, likely reflecting the cumulative impact of higher employment costs introduced in recent years.

What Happens Next for the UK Economy Under Andy Burnham?

Taken together, the data paints a picture of an economy that found some genuine momentum in July, driven by a combination of favourable weather, a major sporting event, a temporary lull in the Iran conflict, and a new Prime Minister moving quickly to introduce support measures for households and businesses. Whether this momentum can be sustained, however, remains an open question.

With tensions in the Gulf already showing signs of re-escalating, and the Bank of England facing a delicate balancing act over interest rates, the coming months will be crucial in determining whether July’s positive data marks the beginning of a genuine recovery or simply a brief and temporary reprieve for Andy Burnham’s new government.