UK economy shrinks for second consecutive month, S&P Global reports

The UK private sector economy contracted for the second straight month in June, with S&P Global’s flash Composite PMI dropping to 49.4. That’s down from 49.7 in May and marks the lowest reading in 14 months.

What the numbers actually show

The flash estimate, released on June 23, paints a picture of an economy losing momentum across multiple fronts. Firms are cutting jobs at an accelerating pace, new orders are weakening, and business expectations have dimmed considerably.

The contraction is particularly notable because it follows what had been a sustained period of expansion. The UK private sector had been growing for 13 consecutive months before May’s reading broke the streak, marking the first contraction since April 2025.

May’s initial reading had actually come in at a more alarming 48.5 before being revised upward to 49.7. The June figure of 49.4 suggests that even after the upward revision, the underlying trend is deteriorating rather than stabilizing.

Services, which make up the bulk of the UK economy, drove much of the decline. Manufacturing showed relative resilience by comparison.

How the UK got here

Throughout much of 2025 and into early 2026, the UK economy had been expanding, with PMI readings comfortably above 50. Political and economic uncertainty has been weighing on business confidence for months, with firms grappling with rising input costs, faltering demand, and ongoing uncertainty.

What this means for investors

For traditional markets, a contracting economy typically puts pressure on equities, particularly domestically focused companies that depend on UK consumer spending. The Bank of England has been navigating a narrow path between supporting growth and managing inflation. Persistent economic weakness could tilt the balance toward rate cuts, which would affect everything from gilt yields to the pound’s exchange rate.

For crypto investors, sluggish economic conditions tend to increase volatility in risk assets. If the Bank of England responds to continued weakness with looser monetary policy, lower rates could eventually push capital toward higher-yielding opportunities, though in the near term, economic deterioration usually means risk-off positioning.

The trajectory of upcoming PMI readings will be critical. Investors across asset classes should be tracking whether the job cut trend intensifies and whether new order weakness spreads further into manufacturing, which has so far held up relatively well.

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