UK Economy Gains Momentum – But Jobs and Costs Still Bite For Food Supply Chain

The UK economy moved onto stronger ground in August, with services leading the recovery and growth hopes improving. The latest Purchasing Managers' Index (PMI) reached 53.5, a 16-month high and firmly above the threshold for expansion. Services performed particularly well, rising to 54.2 on the back of the sharpest increase in new orders in over four years.

For the fresh produce and agri-food sectors, this renewed demand is a double-edged sword. Stronger consumer confidence can translate into greater spending on high-quality fresh food, while resilient international trade flows offer new export opportunities. But the headline optimism is tempered by ongoing labour market strain. Employment has now fallen for eleven consecutive months—the longest decline since the 2008 financial crisis. For food and farming businesses already facing acute seasonal labour shortages, the trend underscores the need for investment in automation and more secure workforce planning.

Cost pressures are also front of mind. Rising wages are squeezing margins across the supply chain, from growers and packhouses to distributors and retailers. While many firms are looking to technology and productivity gains to absorb higher costs, analysts caution that price inflation could return if wage and input pressures persist.

Economists highlight that while the PMI points to stronger growth in services, it does not capture the full picture of the UK economy. Retail, foodservice, and health—all critical channels for fresh produce—may face softer demand than the headline data suggests. Policymakers are expected to hold interest rates steady for now, but the outlook will hinge on inflation trends in the months ahead.

For growers, traders, and suppliers, the message is clear: opportunities are returning, but challenges around costs, labour, and long-term resilience remain.

Source: City AM