Recent revisions to a key economic survey indicate that the UK private sector saw a slight expansion in November, though analysts caution that growth is nearing a halt.

The S&P Global final composite purchasing managers’ index (PMI), which reflects output in both manufacturing and services, fell to 50.8 in November from 52 in October, marking its lowest level in the past 13 months.

Despite the slowdown indicated in the latest research, adjustments to an earlier PMI estimate showed a slight growth in private sector output for November, moving away from an initial contraction figure of 49.9. A PMI reading above 50 signals growth.

Rob Wood, chief economist at Pantheon Macroeconomics, expressed some optimism regarding the significant upward revision of the initial PMI reading.

However, the survey highlighted that many businesses are apprehensive about deteriorating trading conditions over the coming year, driven by tax increases outlined in the October budget and ongoing economic uncertainties.

Tim Moore, director of economics at S&P Global Market Intelligence, noted that concerns about the implications of the autumn budget—particularly those raising employment costs—were prevalent, leading to a more pessimistic view on business investment and the overall UK economic outlook.

In the budget, Rachel Reeves increased employers’ national insurance contributions by 1.2 percentage points, which translates to a £25 billion tax hike for businesses. Along with a rise in the minimum wage and enhanced worker rights, companies have raised alarms about potential slowdowns in hiring and reduced wage increases.

The services sector displayed the highest level of pessimism regarding the trading climate for the next year since December 2022. S&P Global attributed this sentiment to the adverse effects of growing payroll expenses on customer demand.

Challenges within the UK manufacturing sector also held back the overall economic performance in November, as the manufacturing PMI decreased to 48 from 49.9, while the services PMI fell to 50.8 from 52.

Moore remarked that UK service providers reported nearly stagnant business activity in November, with growth decelerating to its slowest pace in over a year. Contributing factors included weaker sales pipelines, reductions in new project initiations, and increased caution from clients.

Even though the Bank of England has cut interest rates to 4.75 percent, the overall monetary policy remains tighter than in the previous decade, which is impacting both business investments and consumer spending. The significant rise in essential costs has also strained household budgets, further suppressing demand.