Global Market: UK stocks rise after services PMI signals economic recovery

Britain's services sector returned to growth in July as stronger domestic demand and easing cost pressures helped lift business activity, according to an S&P Global survey reported by Reuters.

The upbeat data also supported sentiment across European markets, with regional equities trading higher on Wednesday as investors assessed corporate earnings, improving economic indicators and diplomatic efforts to ease tensions in the Middle East, according to Reuters.

The S&P Global UK Services Purchasing Managers' Index (PMI) rose to 52.1 in July from 48.8 in June, marking its first expansion since April and coming in above the preliminary reading of 51.8.


The upward revision also pushed the composite PMI, which combines services and manufacturing activity, to 52.2 from 49.3 in June. The reading moved above the 50 threshold that separates expansion from contraction for the first time since April, Reuters reported.

According to Reuters, the recovery was supported by an improvement in new business. S&P Global's index measuring total new work in the services sector climbed to 50.8 in July from 47.6 in June, the strongest level since February and ending a four-month period of contraction that began after the Iran conflict erupted.

Export demand, however, remained under pressure. New export orders declined for a fifth straight month, although the pace of contraction was the slowest during the current period.

Cost pressures also eased during the month. Service companies recorded the weakest increase in input costs since February, helped by lower oil and gas prices following a ceasefire in the Iran conflict. The pace at which firms raised prices charged to customers also slowed to a five-month low.

The labour market remained weak despite signs of broader improvement. The survey's employment index fell for a 22nd consecutive month, matching the length of a decline seen during the global financial crisis nearly two decades ago. However, the pace of job losses was the mildest since October 2025, according to Reuters.

Business optimism strengthened further in July, with confidence about activity over the next 12 months reaching its highest level since February. Firms were encouraged by expectations of easing geopolitical tensions in the Middle East and moderating inflationary pressures, supporting a more positive outlook for the year ahead.

The stronger-than-expected services data added to evidence that the UK economy regained momentum at the start of the third quarter, providing a positive backdrop for European equities as investors looked for signs of resilient economic growth despite ongoing global uncertainties.

The upbeat data also supported sentiment across equity markets. British stocks gained after the survey pointed to a recovery in the country's dominant services sector, with the domestically focused FTSE 250 benefiting from expectations of stronger economic activity. The broader FTSE 100 also advanced alongside European shares as investors assessed corporate earnings, improving economic indicators and diplomatic efforts to ease tensions in the Middle East, according to Reuters.