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UK sectors reporting demand growth rose to four in August

Lloyds
Published on: 17 September 2025
2 min read
  • Lloyds’ UK Sector Tracker reveals that demand grew in four out of 14 UK sectors in August – three more than in July.
  • Four sectors saw output growth – consistent with July’s number.
  • Despite a rise in cost inflation, the full extent of cost pressures is not being passed on to customers.

 

The number of UK sectors reporting demand growth in August rose to four – up from one in July – according to Lloyds’ latest UK Sector Tracker. 

Software and services (63.8), financial services (57.1), technology equipment manufacturing (52.5), and automobile and auto parts manufacturing (51.3) all saw demand, as measured by new order volumes, rise in August. This was the highest number of sectors to report demand growth since November 2024.

However, August also marked the twelfth successive month where demand softened in more than half of the 14 UK sectors tracked. 

Software and services posted the fastest rate of demand growth as firms reported new client and contract wins, while expansion in both output and orders was seen in automobile and auto parts. The uplift in new orders was the sector’s first since May 2023. 

Output growth holds steady

Four sectors overall saw output grow in August – the same number as July. Software and services (65.2) and financial services (57.2) continued to expand and did so at a faster pace than the month before. They were joined by automotive and auto parts manufacturing (55.3) and industrial goods manufacturing (50.1). For a fifth successive month, software and services grew at the fastest rate of any sector monitored, with activity growth reaching a 40-month high. 

Cost inflation rises but the full extent is not being passed on to charges

The overall rate of cost inflation rose to a three-month high in August, with eight sectors reporting that costs rose at a faster pace than the month before. Businesses also raised their prices, with seven sectors doing so faster than in July.

However, margin pressure – measured by the gap between costs and prices – remained the same as in July, indicating that firms [in 13 sectors] continued not to pass on the full extent of price rises to their customers.

Food and drink manufacturers increased the prices they charged to their customers at a significantly slower rate in August (50.9 in August vs. 56.9 in July), despite their own cost inflation accelerating (64.0 in August vs. 57.6 in July).

Our data indicates a broadening of demand growth across the UK economy. However, businesses’ costs continue to rise, and the Tracker shows firms aren’t passing the full extent on to customers. This could help moderate spikes in inflation for now, although businesses might reconsider their strategies if cost increases accelerate further or demand conditions improve.

Nikesh Sawjani Senior UK Economist at Lloyds

 

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