The UK's services industry saw slower growth last month, with companies raising prices at the fastest pace since May in response to higher fuel and energy costs, according to a new survey.
The S&P Global UK services PMI index registered 52.1 in September, down from 52.5 in August. A reading above 50.0 indicates sector growth, while below signals contraction. The score exceeded an earlier estimate of 51.7 and marked the third consecutive month of increased business activity.
Rising costs and price hikes
Firms surveyed reported surging fuel prices and increased staff pay as factors pushing up overall business costs last month. Efforts to protect margins led companies to raise customer prices at the fastest pace since May, the survey found.
September's survey also marked two years of continuous job cuts across the services industry, though at the slowest rate for nearly a year. Companies using new technology, including artificial intelligence, cited it as a reason for not replacing workers when they leave.
Sector impact and economic outlook
Services firms span subsectors including hospitality and leisure, real estate, financial services, healthcare, and transport, and constitute the UK's dominant industry.
Tim Moore, economics director for S&P Global Market Intelligence, said: “Surging fuel prices due to the Middle East conflict continued to drive up input cost inflation in September.” He added: “This led to the sharpest increase in prices charged by service sector companies since May and therefore signalled a clear reversal of the slowdown seen in the middle of 2026.”
The average price of diesel has hit an all-time high, reaching £2 a litre last week. Petrol prices have also risen, averaging around 42p a litre more than since the start of the Iran war. Businesses report higher transportation costs across supply chains, along with increased oil and gas prices and international shipping disruption.
Rate hike concerns
Thomas Pugh, chief economist for RSM UK, said increased price pressure across the sector “will worry the MPC and boosts the case for rate hikes later this year”. The Bank of England committee has been monitoring for second-round inflation effects arising from higher prices in the economy, including businesses raising prices due to expected consumer behaviour changes or competitor actions.
Mr Pugh described the next six months as “look more challenging”, adding: “Rising energy prices risk pushing inflation above 4% early next year, which will push up business operating costs, squeeze households’ real incomes and potentially force the Bank of England to hike interest rates later this year.”
