UK Services Growth Eases On Renewed Fall In New Work

(RTTNews) - The UK service sector growth eased in January as new work declined for the first time since October 2023, survey results from S&P Global showed on Wednesday.

The final services Purchasing Managers' Index registered 50.8 in January, down from 51.1 in December and was also below the flash estimate of 51.2.

Although the data signaled a sustained expansion of activity, the reading was the joint lowest score in 15 months and was also well below the pre-pandemic average. The final composite output index registered 50.6 in January, up fractionally from 50.4 in December. The flash reading was 50.9.

Total services new work fell slightly in January, ending a 14-month sequence of expansion. Global economic uncertainty, elevated interest rates and weaker business confidence were cited as major reasons for the decline. Export sales decreased despite resilient demand from US clients.

There was a marked reduction in backlogs of work, which reflected spare capacity following a sustained period of weak demand. The fall in unfinished work was the sharpest since August 2023.

Staffing numbers in services decreased for the fourth straight month. The rate of job shedding accelerated to its fastest since January 2021.

Rising salary payments and efforts by suppliers to pass on higher payroll costs contributed to the strongest pace of cost inflation since April 2024. Consequently, prices charged by service sector firms increased to the greatest extent for 13 months.

Sentiment among service providers was the lowest since December 2022 amid concerns about squeezed margins, weak customer demand and lackluster UK economic growth prospects.

"January data highlighted a challenging business environment for UK service providers as stagflation conditions appeared to take a firmer hold at the start of the year," Tim Moore, an economics director at S&P Global Market Intelligence said.