UK economy gathers pace but cost pressures intensify, PMI shows

LONDON, Sept 3 (Reuters) - Activity in Britain's dominant services sector grew for the second month in a row in August and confidence rose, according to a survey on Thursday that also showed more firms reporting rising prices, a potential concern for the Bank of England.

The final reading of the S&P Global UK Services Purchasing Managers' Index (PMI) rose to 52.5 in August from 52.1 in July, its strongest growth since April. Thursday's reading was slightly below a provisional reading of 52.8 but added to signs of resilience in the economy despite the U.S.-Iran war.

"August data highlighted improving operating conditions across the UK service economy. Business and consumer spending saw further gains after declining during the second quarter of 2026," said Tim Moore, economics director at S&P Global Market Intelligence.

• S&P Global said more firms reported increasing the prices they charge as well as higher input prices after a slowdown in both measures in July.
• The BoE is keeping a close eye on firms' pricing plans as it tries to gauge how much of the surge in energy prices caused by the Middle East conflict will be passed on and push up inflation.
• Optimism among services firms rose to the highest since February despite concerns about the Iran war and inflation.
• The survey's index of new work eased slightly to 50.7 in August from July's 50.8.
• Employment decreased at the slowest pace since October 2025, helped by improved sales pipelines and broader market conditions.
• The composite PMI, which includes the smaller manufacturing sector, rose to 52.5 from 52.2, the highest since April.