UK service sector sees marginal expansion in Dec. – PMI

The UK service sector ended 2024 with subdued growth, as business activity expanded only slightly in December. The S&P Global UK Services PMI Business Activity Index rose to 51.1, up from 50.8 in November, marking the fourteenth consecutive month above the neutral 50.0 threshold. However, growth momentum was weak, with the quarterly average at its lowest in a year.

Slow Growth in New Orders: Total new orders stagnated, with the index recording its lowest reading since October 2023. Respondents cited weak business and consumer confidence, driven by concerns over domestic economic prospects and rising employers’ National Insurance contributions.

Employment Challenges: The service sector saw its sharpest decline in employment since January 2021. Nearly 23% of respondents reported staff reductions, with many attributing the cuts to hiring freezes and non-replacement of roles due to rising payroll costs.

Input Cost Inflation: Input prices rose at their fastest pace in eight months, driven by higher salaries and raw material costs. This led to a robust increase in prices charged by service providers, with inflation hitting a six-month high.

Economic Sentiment

Business optimism remained subdued, with growth expectations for 2025 unchanged from November’s 23-month low. Concerns over rising costs and a challenging investment climate weighed heavily on sentiment.

“The service sector ended last year with only a marginal upturn in business activity and a near-stalling of incoming new work. Survey respondents suggested that falling business and consumer confidence, largely due to worries about domestic economic prospects in 2025, had led to a considerable loss of growth momentum.” Tim Moore, economics director at S&P Global Market Intelligence, said.

Attribution: Amwal Al Ghad English