UK economy grows as PMI rises WH Smith slides on accounting error

Markets weigh a stronger services PMI against a big accounting mistake at WH Smith and looming fiscal pressures

UK economy shows momentum as PMI rises WH Smith slides on accounting error

The S&P Global PMI flash for August shows the private sector expanding at the fastest pace in a year, with the index at 53.0 and the services sector leading the gain. Manufacturing stabilised and the overall growth pace has quickened over the summer, but the picture remains uneven. Hiring remains weak, with payroll reductions continuing for a thirteenth month in total, and firms point to fragile demand and higher staff costs linked to autumn policy changes. Input cost inflation rose to its highest level since May, keeping price pressures in the mix and suggesting the Bank of England will stay data dependent on any policy moves. Export demand remains weak as order books are described as uneven and fragile, underscoring a careful recovery rather than a strong upswing.

In corporate news, WH Smith shares plunged after a £30m accounting misstep and a weaker profit outlook, with the stock down as much as 40% and the market value slashed. Peel Hunt downgraded the stock to hold and cut its price target, while the firm disclosed a review by Deloitte into the causes of the error, which related to North American operations. Separately, Waitrose chief James Bailey is stepping down after more than five years, with interim leadership to guide the business during a period of transition. On the fiscal front, official data show July borrowing at £1.1bn as tax receipts rose, spelling ongoing pressure for the chancellor to balance growth with fiscal rules while the autumn budget looms.

The data set paints a mixed portrait. On the one hand, activity is lifting and sentiment is improving in services, but the underpinnings of that growth remain fragile: hiring is weak, costs are rising, and demand is uneven. The WH Smith accounting error compounds this fragility by highlighting governance and execution risks that can unsettle investors just as the economic picture looks more positive. The fiscal backdrop adds another layer of complexity. While July’s lower borrowing and higher tax receipts ease near-term pressure, the structural questions about headroom and the right mix of tax and spending persist. In this environment, confidence hinges on a clear plan from policymakers and credible governance from firms. The autumn budget will not merely be a numbers exercise; it will be a test of political resolve and market trust. The eurocentric and global risks continue to spill into the UK through demand, supply chains, and currency movements, making a steady but cautious pace of growth the most likely path for now.

Highlights

Policy clarity and credible governance will determine whether the current uptick lasts.