UK factory output returned to growth for the first time in a year according to October’s flash purchasing managers’ index, lifting the composite reading to 51.1 even as services growth remained subdued ahead of Rachel Reeves’s successor John Healey’s autumn Budget.
S&P Global said manufacturing production climbed to 51.2 from 45.7 in September, while the broader manufacturing headline index still sat just below the 50 breakeven mark at 49.6. Services activity matched the composite at 51.1, marking a second consecutive month of expansion but only at a marginal pace as households and boards deferred spending decisions.
Why factories improved
Survey respondents linked the production upturn to restocking and a tentative revival in domestic orders, particularly along automotive supply chains that had been disrupted by Jaguar Land Rover’s cyber shutdown. Several producers noted that JLR’s phased restart in the West Midlands removed one source of uncertainty, even though tier-one suppliers said margins remained squeezed.
Input price pressures cooled to the weakest since November 2024, helping firms pass on smaller output charge increases. That combination is welcome at the Bank of England, which held Bank Rate at 3.75% in September while warning that Middle East energy shocks could still push CPI inflation further above target.
Services still cautious
The services index has now expanded for six months, yet October’s pace was the second-slowest since May. Firms cited weak consumer sentiment and postponed corporate projects until the 28 October Budget clarifies tax and spending plans under Prime Minister Andy Burnham. Export orders remained soft, contrasting with a stronger eurozone flash PMI published the same week.
Employment across the private sector continued to contract, albeit at the slowest rate since May. Hiring managers again blamed elevated National Insurance costs and uncertainty over wage settlements in a year when pay growth still runs above the MPC’s comfort zone.
Market read-through
London equities opened steadier after the release, with industrial names outperforming domestically focused retailers. Gilt yields nevertheless held near recent highs as traders priced a higher-for-longer path for Bank Rate; three MPC members voted for an immediate quarter-point hike in September.
For fund managers, the flash PMI is a reminder that UK growth is bifurcated: manufacturing is bouncing from a low base while services—the bulk of GDP—are barely outpacing stagnation. Final PMI data later this month, alongside official industrial production figures, will show whether the factory rebound is statistical noise or the start of a broader inventory cycle.
What to watch
Investors will cross-check the survey against October retail sales and the Office for Budget Responsibility’s forecasts at Healey’s Budget. If manufacturing strength persists while services lag, the MPC’s hawks may argue that industrial capacity constraints warrant tighter policy, while doves will point to fragile job creation. Either way, today’s print gives the FTSE’s cyclical names a talking point on an otherwise energy-heavy morning.