UK private sector activity ended 2025 still expanding, but only just slightly above expansion territory. December's composite PMI of 51.4 confirms an eighth consecutive month above the growth threshold, yet the expansion remains marginal. Both manufacturing and services contributed, supported by a renewed upturn in new orders after a brief dip, suggesting demand has stabilised rather than strengthened.

The services sector PMI also grew slightly to 51.4. Business activity continued to rise, but at a subdued pace, reflecting lingering headwinds from weak domestic economic conditions and political uncertainty. Encouragingly, new business growth was the strongest seen on average in 2025, with improved sales pipelines and a modest revival in export demand, particularly from the United States. This was sufficient to lift backlogs for the first time since mid-2023, hinting at emerging capacity pressures.

The labour market remains the weakest link. Employment fell for a fifteenth consecutive month as firms restrained hiring amid wage pressures and squeezed margins. At the same time, cost pressures intensified, with input inflation at a seven-month high feeding through to faster output price increases.

Looking ahead, expectations have improved. Firms are cautiously optimistic about 2026, though rising costs and fragile demand continue to temper confidence. These updates take the RPI to minus 16 and the RPI-P to minus 2, meaning that economic activities are lagging expectations in the UK.

The final composite is expected unrevised at 52.1 in the final report for December from the flash and versus 51.2 in November. The final services index is expected unrevised from the flash at 52.1 in the final report for December and up from 51.3 November.

The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.