The implementation of the fiscal budget boosts business confidence. The UK's January PMI surged to 53.9, reaching a new 21-month high.

The latest survey data shows that following the release of the budget in the UK, business owners have approved new projects one after another, with strong performances from technology and financial service companies driving the fastest growth in the private sector in nearly two years in the country. The S&P Global Purchasing Managers' Index (PMI) jumped to 53.9 in January, hitting a 21-month high, significantly better than the previous month's 51.4 and economists' forecast of 51.5. The S&P noted that the index corresponds to a quarterly growth rate of about 0.4%, and any reading above 50 indicates that the economy is expanding. After the data was released, the GBP/USD exchange rate rose by 0.2% to 1.352 on the same day, reaching a daily high. The currency market subsequently adjusted its expectations for a rate cut by the Bank of England, for the first time since December of last year, anticipating only a rate cut of 25 basis points this year. The PMI survey shows that after the Budget announcement by the Labour government on November 26 last year, the removal of policy uncertainty prompted businesses to start new projects. Despite Chancellor Rachel Reeves announcing a 260 billion ($352 billion) tax increase plan, the actual impact on businesses has been smaller than expected. Meanwhile, even as the US attempted to reignite trade tensions through its maneuvers in Greenland, British businesses seem to have not been significantly affected by geopolitical risks. This data suggests that the UK economy has regained momentum after slowing growth in the second half of 2025 and deteriorating labor market conditions. "January's preliminary PMI reading further signals a pickup, indicating that GDP growth in the first quarter is likely to accelerate as the economy gradually moves beyond the anxiety of the months leading up to the Budget announcement," said Elliott Jordan-Doak, Senior UK Economist at Pantheon Macroeconomics. He believes that the widespread improvement in the subcomponents of the PMI index signifies that "positive economic momentum may be building in early 2026." However, Matt Swannell, Chief Economic Advisor at EY ITEM Club, cautioned that the significant increase "may be too optimistic," and warned of "extreme volatility in recent data." As a pillar of the UK economy, the service sector continues to outperform manufacturing: the services operating index hit a 21-month high, while the manufacturing output index has expanded for the fourth consecutive month. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said, "UK economic growth is still being led by the services sector, with particularly strong contributions from financial services and the technology industry. Businesses report that demand in both domestic and export markets has risen, driving output growth to its fastest pace since April 2024." S&P stated that overall new orders in January in the UK hit a new high since October 2024, with business expectations for the next year also rising to the highest level since September 2024; driven by recovering demand in European, US, and Chinese markets, export sales growth also hit a record high in 18 months. However, the survey also showed that businesses are still continuing to cut staff, and input costs are rising at the fastest pace in eight months.