British shares closed higher on Friday, with the blue-chip FTSE 100 index gaining 0.57% as investors digested a wave of encouraging UK economic data.
S&P Global Market Intelligence data showed the flash UK Composite PMI Output Index climbed to a four-month high of 52.5 in August, up from 52.2 in July and ahead of the consensus forecast of 51.6.
Services sector activity drove the improvement in the composite reading, while the manufacturing index retreated during the month, reflecting ongoing sector-level divergence in the UK economy.
S&P Global Market Intelligence Chief Business Economist Chris Williamson said: “The UK economy picked up a bit more pace in August, adding to signs that we should see solid economic growth of around 0.3% in the third quarter.”
Williamson added that “the expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools.”
He also noted that “the data suggest the Bank of England looks likely to keep a hawkish bias but will stay cautious, holding off any rate hikes until the growth and inflation trajectories become clearer.”
UK consumer confidence also surprised to the upside, with the GfK Consumer Confidence Index rising to -14 in August from -17 in July, beating the consensus estimate of -18.
GfK Consumer Insights Director Neil Bellamy noted “increased optimism looking ahead to the next 12 months for personal finances (up three points to 4) and more people also think now is a good time to make a major purchase (up five points to -7, the highest since December 2021).”
Bellamy added that economic optimism over the next 12 months was “up five points to -23, the best since August 2024, shortly after Keir Starmer took office,” though the measure remains deep in negative territory.
Data from the UK’s Office for National Statistics showed monthly retail sales declined 0.5% in July after a revised 0.7% gain in the prior month, introducing a note of caution into an otherwise positive data set.
Public sector net borrowing, excluding public sector banks, fell sharply to 1.8 billion pounds in July from a revised 12.8 billion pounds in the previous month, according to the ONS.
Looking ahead, investors will turn their attention to a fresh round of economic releases next week, including the CBI distributive trades survey, Nationwide’s August house price index, and July car production figures.
On the corporate front, Standard Life (SDLF.L) secured an investment commitment of up to 200 million pounds from shareholder MS&AD Insurance Group for a planned UK pension-risk transfer partnership involving CVC Capital Partners, Prudential Financial, and Goldman Sachs Group.
Shares in the British life insurance group rose 1.04% by the close, reflecting market enthusiasm for the deal and the broader positive tone across UK equity markets on Friday.