With inflation cooling, interest rates nearing their peak, and a new government in place, the UK economy is showing signs of cautious recovery. However, not all sectors are moving in the same direction. Some industries are bouncing back strongly, while others continue to lag. Here is a snapshot of the three best-performing and three worst-performing sectors so far this year.
Top three performing sectors
Private services – especially consumer-facing
The private services sector has delivered the strongest performance, with notable gains in hospitality, leisure, and consumer-focused activities. This part of the economy has benefited from improving confidence and a pick-up in discretionary spending. Services output has grown at its fastest pace in nearly a year, suggesting that consumers, though still price-conscious, are returning to restaurants, entertainment, and travel in larger numbers.
House-building
While the wider construction sector remains mixed, residential development has seen a modest recovery. Activity in house-building improved for the first time in over six months, supported by slightly lower materials costs and a build-up of demand from earlier in the year. This growth is still fragile, but it reflects cautious optimism among developers responding to stabilising interest rates and stronger mortgage approvals.
Financial, legal, and technology services
Professional services continue to be a bright spot, helped by steady export demand and strong global positioning. Financial and legal firms remain central to the UK’s services-driven economy, and the technology sector continues to expand its share of GDP. The UK’s position as a hub for fintech, consulting, and digital services remains secure, supporting steady job growth and investment in these areas.
Bottom three performing sectors
Commercial construction
In contrast to the improvement in house-building, commercial construction is stuck in reverse. Activity has declined sharply, with businesses scaling back investment in office, retail, and large-scale commercial projects. Developers remain wary of long-term occupancy trends and face higher borrowing costs. As a result, fewer commercial projects are breaking ground, and future pipelines look lean.
Manufacturing
The UK manufacturing sector continues to struggle with low output, weak demand, and elevated input costs. Although some sub-sectors, such as food processing, remain resilient, others, including automotive and textiles, are experiencing sharp contractions. Global supply chain issues and subdued export orders have dampened confidence, and the sector has yet to regain the momentum it had pre-2020.
Hiring and employment services
While not a traditional sector in itself, employment and recruitment activity gives a strong signal of economic health. Unfortunately, hiring confidence is down significantly, with many employers delaying recruitment. This is partly due to concerns over demand, and partly linked to rising employment costs, such as the increased rate of employer National Insurance contributions. As a result, recruitment agencies and HR services are facing declining revenues and job openings are down across many industries.
Conclusion
The UK economy remains a mixed bag. Private and professional services are driving forward, helped by improved consumer activity and export performance. However, manufacturing and commercial property are still facing headwinds, and the slowdown in hiring suggests that employers are not yet convinced the recovery is sustainable.
Policymakers will be watching closely. Continued weakness in construction and manufacturing could weigh on overall growth, even as parts of the economy start to accelerate again. The question now is whether confidence spreads, or whether the divide between sectors continues to widen.