The UK's crucial services sector delivered its strongest performance in nine months during February, sparking fresh optimism about the country's economic resilience. According to the latest S&P Global/CIPS UK Services PMI Business Activity Index, the industry recorded a reading of 54.9, up from January's 54.3 and comfortably above the 50.0 threshold that separates growth from contraction.
Business Confidence Soars to Two-Year Peak
Perhaps most notably, business expectations for the year ahead surged to their highest level since February 2022. Companies reported increased client demand and a gradual improvement in economic conditions, suggesting the sector may be turning a corner after a challenging period.
Cost Pressures Continue to Ease
The survey revealed welcome news on the inflation front, with input cost inflation slowing to its weakest pace since February 2021. While staffing costs and rising wages remained significant factors, the overall rate of increase moderated considerably.
Employment Shows Modest Improvement
Job creation within the services sector accelerated to its fastest rate in three months, indicating growing confidence among business leaders. However, many firms continued to report challenges in finding suitable candidates, particularly for specialist roles.
Mixed Performance Across Service Categories
The recovery wasn't uniform across all service sectors. Business-to-business companies and financial services providers reported the strongest growth, while consumer-facing services experienced more modest improvements amid ongoing cost of living pressures.
What the Experts Say
Tim Moore, Economics Director at S&P Global Market Intelligence, commented: "The UK service economy has regained momentum this month, fuelled by a rebound in new business growth and the fastest rise in employment since last November."
He added: "Service providers cited a turnaround in client demand and signs that economic conditions have started to recover after a sluggish phase."
Broader Economic Implications
The stronger-than-expected performance in services, which accounts for around 80% of the UK economy, provides encouraging signs for policymakers. The combination of robust activity and moderating price pressures suggests the economy may be achieving the elusive "soft landing" many had hoped for.
