Upswing in UK services firms points to renewed economic growth, PMI survey shows

(Reuters) - British services companies reported the strongest upswing in activity in almost a year during April, despite a new surge in cost pressures, according to a survey on Friday that pointed to a solid rate of economic growth.

The S&P Global UK Services Purchasing Managers' Index rose in April to 55.0, its highest level since May 2023 and up from a preliminary reading of 54.9. Readings above 50 represent expansion.

The survey showed a robust increase in new orders, but also the biggest acceleration of cost pressures since August - something that is likely to be noticed by Bank of England officials who next week will meet to set interest rates.

Many businesses attributed the inflation squeeze to a 10% increase in the national minimum wage in April, while some also said rising salary costs were a reason why employment growth slowed to its lowest level this year.

"The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year's shallow recession," said economics director Tim Moore from S&P Global Market Intelligence.

Relief at a turnaround in the economic outlook was commonly cited as a factor supporting sales pipelines in April. However, there were also reports that clients remained somewhat risk averse and under pressure from elevated inflation.

The rising fortunes of the dominant services contrast with the manufacturing PMI, which dipped back below the 50 mark after venturing briefly into growth territory in March.

The composite PMI - which combines Friday's services PMI with the earlier factory survey - rose to 54.1 from 52.8 in March, marking a one-year high.

(Reporting by Andy Bruce in Manchester, England; Editing by Toby Chopra)