LONDON — Britain's services sector returned to growth in July, providing a fresh indication that parts of the UK economy are beginning to regain momentum after a period of weaker activity.

The S&P Global UK Services Purchasing Managers' Index (PMI) rose to 52.1 in July, up from 48.8 in June. A reading above 50 indicates an expansion in business activity.

The improvement was supported by stronger new orders, while companies also reported a significant improvement in their expectations for activity over the next 12 months. Business optimism reached its highest level since before the Iran conflict began in February.

The services industry is particularly important to the UK economy, covering major areas such as professional services, finance, hospitality, transport and consumer-facing businesses. Improving demand could therefore provide wider support for economic activity if the trend continues.

Companies also benefited from signs of easing inflationary pressure and greater confidence about future conditions. However, businesses continue to face challenges including operating costs, cautious consumer spending and wider geopolitical uncertainty.

The July figures offer an encouraging signal for Britain's economic outlook, although economists will be watching future PMI readings to determine whether the recovery can develop into sustained growth during the second half of 2026.