UK service sector growth slows in November amid budget uncertainty
Growth in the UK service sector slowed in November amid a renewed decline in new orders, purchasing managers’ index survey results from S&P Global showed on Wednesday.
The services PMI business activity index fell to 51.3 points in November from 52.3 in October, but beat the flash reading of 50.5 released late last month.
The reading remained above the neutral 50-point mark separating growth from contraction but indicated only a marginal expansion in service sector output.
S&P Global said service providers responding to the survey commented on growth headwinds from subdued business and consumer confidence. A number said that uncertainty ahead of the UK government budget had led to cautious spending patterns and delayed investment decisions.
‘A lack of willingness to commit to new projects was reflected in a renewed downturn in service sector order books in November. Although only fractional, the decline in new work was the first recorded since July,’ S&P Global commented.
Overall export sales across the service economy continued to soften in November, with the fastest rate of decline since June.
Reduced backlogs of work and fears about employment costs acted as a brake on staff hiring. Lower workforce numbers have been recorded in each month since October 2024, while the latest decline was the fastest for nine months.
The survey indicated only a marginal rise in output charges in the service economy, while the rate of prices charged inflation eased to its lowest in just under five years.
S&P Global said service providers remain optimistic overall about their year ahead growth prospects. Around half of the survey panel predict an increase in business activity, while only 16% forecast a decline.
‘November data revealed an abrupt end to the steady improvement in order books seen since the summer. Unfavourable demand conditions were signalled in both domestic and export markets,’ said Tim Moore, economics director at S&P Global Market Intelligence.
‘Lower workloads led to a renewed slowdown in business activity growth across the UK service economy, with the latest expansion much softer than the post-pandemic trend.’
The UK composite PMI - a blend of the service and manufacturing sector readings - fell to 51.2 points in November from 52.2 in October. The index signalled a marginal rise in business activity and beat the flash reading of 50.5. The index has been above the neutral 50-point mark in each month since May.
On Monday, S&P Global said the PMI for manufacturing rose to a 14-month high of 50.2 points in November from 49.7 in October, climbing above the no-change threshold.
It was in line with the flash estimate from last month.
Tim Moore said: ‘Survey respondents widely commented on business challenges linked to fragile client confidence, heightened risk aversion and elevated policy uncertainty in the run up to the budget. Many firms noted that major spending decisions had been delayed, while some also cited long-term growth headwinds from subdued investment spending.
‘Intensifying price competition at home and abroad, combined with weal sales pipelines, contributed to an erosion of margins across the service economy. Input cost inflation accelerated during November, mostly driven by higher salary payments, but prices charged by service sector firms increased at the slowest pace for nearly five years.’
The services PMI is compiled by S&P Global from responses to a questionnaire from a panel of around 650 service sector companies in the UK. The responses were collected between November 12 and 26. A construction PMI reading for the UK will follow on Thursday.
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