London, 22 February 2026 – In a welcome boost to the UK economy, the flash purchasing managers' index (PMI) for overall business output rose to 53.9 in February, its highest level in 22 months and above the 53.7 recorded in January. The reading comfortably beat market expectations, underscoring accelerated expansion in the services and manufacturing sectors at the start of the year.

Services and Manufacturing Drive Growth

The composite PMI, which blends services and manufacturing data, signals the strongest private sector performance since April 2024. Services, a cornerstone of the UK economy, led the uptick alongside manufacturing, reflecting improved demand conditions despite persistent global headwinds.

This positive momentum arrives amid mixed signals from other indicators. The Office for National Statistics' latest Business Insights and Conditions Survey, covering expectations up to late February, revealed that 20% of trading businesses anticipate a turnover decline this month – down from January but stable year-on-year – while 16% expect growth. Accommodation and food services face the steepest challenges, with 36% predicting lower turnover.

Price and Cost Pressures Ease Slightly

Inflationary pressures appear to be moderating. Just 21% of trading businesses plan to raise prices in February, a 2 percentage point drop from January and aligned with patterns from prior years. Labour costs remain the top factor at 29%, followed by energy and raw materials at 20% each.

These developments align with the Bank of England's February Monetary Policy Report, which noted inflation above the 2% target due to administered prices and labour costs, but projected slowing wage growth to 3.2% by Q2 2026. The MPC held Bank Rate at 3.75% on 4 February, balancing persistent inflation against subdued growth prospects.

Broader Economic Context

While investment intentions have weakened and global demand remains soft, recent PMI strength suggests underlying resilience. Agents' contacts report subdued confidence, yet the PMI expansion – above the 50 no-change mark – points to potential upside for GDP in early 2026.

• Key PMI Highlights: Composite at 53.9 (22-month high), up from 53.7.
• Turnover expectations: 20% decline forecast, 16% growth.
• Price hike plans: 21% of firms, led by labour costs.
• Bank Rate steady at 3.75% amid 2%+ inflation.

Economists view the PMI beat as evidence of stabilising conditions post-crisis, though risks from credit constraints and sector-specific strains persist, particularly for SMEs in hospitality and retail. Upcoming data will clarify if this February flash proves sustainable.