(July 24): Britain’s private sector companies reported a surge in confidence, hiring and new orders after Labour’s landslide election victory, a sign the new government may enjoy stronger growth.

S&P Global’s purchasing managers’ index (PMI) rose to 52.7 in July, up from 52.3 the previous month. It was a two-month high and slightly above economists’ expectations. Readings above 50 indicate growth.

The survey contained some early signs that businesses may ramp up spending and hiring as Labour’s large win increases hopes of a return to political stability. Prime Minister Keir Starmer has vowed to revive Britain’s anaemic growth rates as he seeks to generate more tax revenues to boost funding for deteriorating public services.

S&P said new business grew at the fastest rate in 15 months, while hiring was the strongest in more than a year. After stumbling last month, confidence rebounded in July and is now close to a two-year high reached earlier in the year. 

“The first post-election business survey paints a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future, reporting a renewed surge in demand and taking on staff in greater numbers,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a report on Wednesday.

S&P said that growing confidence in the outlook was pinned on an improving economic backdrop, hopes of interest rate cuts and political stability. The manufacturing PMI jumped to a 24-month high, while the services sector remained firmly in growth territory.

There were also encouraging signs for the Bank of England before its decision on whether to cut interest rates next week. Prices charged in the private sector rose at the slowest pace in more than three years, an easing that leaves open “the prospect of a summer rate cut,” according to Williamson.

However, he cautioned that the uptick in hiring could lead to price pressures further down the line. 

“The renewed hiring trend could also add to pay pressures, sustaining some stickiness of inflation in the coming months,” Williamson said.