The UK's dominant service sector has hit its slowest growth rate in seven months, according to worrying new data that suggests Britain's economic recovery is losing momentum.
The latest S&P Global/CIPS UK Services PMI Business Activity Index fell to 52.9 in October, down from 53.5 in September and marking the weakest expansion since the recovery began in January.
Business Confidence Crashes to Near Record Low
Perhaps most alarmingly, business optimism plunged to its second-lowest level since data collection began in 2012, excluding the pandemic period. Companies reported that concerns about the economic outlook, rising interest rates, and weak client demand were crushing confidence.
Tim Moore, Economics Director at S&P Global Market Intelligence, didn't mince words: "UK service providers experienced a sharp loss of momentum during October, as falling new orders and gloomy business prospects constrained output growth."
Rising Costs Continue to Bite
The survey revealed that input cost inflation accelerated for the third consecutive month, driven by higher fuel prices and increased staff costs. Many service providers reported passing these expenses onto consumers, though the rate of charge inflation remained below the survey's long-run average.
Employment growth also slowed considerably, with some businesses citing hiring freezes and natural wastage instead of replacing departing staff.
Key Findings from the Report:
- New business declined for the first time since January 2023
- Input cost inflation accelerated for third straight month
- Employment growth slowed to its weakest since February
- Business expectations fell to second-lowest on record
- Service sector performance varied by sub-sector
The data suggests that the UK's economic resilience is being severely tested by high borrowing costs and persistent inflation, raising fresh concerns about the possibility of recession in the coming months.
