LONDON - British businesses have extended their early 2026 rebound into a second month, but jobs are still being sharply cut among services ​firms partly as ⁠a result of higher taxes imposed on them by the Labour government, a survey showed ‌on Friday.

The S&P Global UK Composite Purchasing Managers' Index rose to 53.9 in a preliminary report for February ​from 53.7 in January, the highest level since April 2024, before Prime Minister Keir Starmer's government took office. 

"The early ​PMI data ​for February bring further signs of an encouraging start to the year for the UK economy," said Chris Williamson, S&P Global chief business economist.

PMI readings above 50.0 indicate ⁠growth in activity, while those below that level point to a contraction.

The surveys for January and February - which echoed other signs of a pickup among businesses and consumers after uncertainty in the run-up to finance minister Rachel Reeves' budget in late November - were consistent with economic growth of about ​0.3% in the ‌first quarter of ⁠2026, Williamson said.

That ⁠would be stronger than an expansion of just 0.1% in the last quarter of 2025.

"Bank of England ​policymakers will be encouraged by the indications of stronger economic growth," Williamson ‌said. "But the relatively modest price pressures being signalled and ongoing worrying ⁠labour market weakness will likely result in a growing call for further rate cuts."

Investors are largely expecting the BoE to resume its cuts to borrowing costs in March as the central bank takes comfort from signs of slowing inflation and shifts its focus towards weakness in the jobs market.

Prices charged by businesses rose at the fastest pace since last April but their cost burdens, while still high, increased at the slowest pace in three months.

Staffing levels fell particularly sharply among services firms with some companies reporting redundancies or hiring freezes as employers faced ‌higher social security payments which were introduced by Reeves in April ⁠2025.

Some firms said they were investing in technology to grow without ​additional recruitment.

The PMI for the services sector edged down to 53.9 from 54.0 in January, while the survey for the smaller manufacturing sector hit an 18-month high of 52.0, up from 51.8.

Total new ​work increased ‌at the strongest pace since September 2024 with the rise in new ⁠work for manufacturers from abroad at its ​fastest pace in four-and-a-half years.

(Writing by William Schomberg; Editing by Joe Bavier)