New data from S&P Global shows a slowdown in business activity growth across the UK service economy in November amid weakening demand conditions and fragile client confidence.
Moreover, reduced volumes of new work and elevated margin pressures contributed to the fastest decline in employment since February.
At 51.3 in November, the headline seasonally adjusted S&P Global UK Services PMI Business Activity Index eased from 52.3 in October and signalled only a marginal expansion of service sector output. The index was up from the earlier ‘flash’ figure in November (50.5) and has posted above the neutral 50.0 value in each month since May. However, the latest reading was still below the average seen over this period.
Growth headwinds
Service providers widely commented on growth headwinds due to subdued business and consumer confidence. A number of firms noted that uncertainty ahead of the Budget had resulted in delayed investment decisions and cautious spending patterns.
A lack of willingness to commit to new projects was reflected in a renewed downturn in service sector order books in November. Although only fractional, the decline in new work was the first recorded since July.
Some firms commented on efforts to expand into new overseas markets to help offset weak domestic demand. However, overall export sales across the service economy continued to soften in November, with the rate of decline accelerating to the fastest since June. This was attributed to intense competition and challenging economic conditionsin major global markets, in part reflecting geopolitical uncertainties and concerns among clients about US tariffs.
An employee problem
Meanwhile, reduced backlogs of work and worries about elevated employment costs once again acted as a brake on staff hiring in November. Lower workforce numbers have been recorded in each month since October 2024 and the latest decline was the fastest for nine months.
Higher payroll costs were cited as a key factor pushing up operating expenses at service sector businesses during November. There were also reports of rising raw material prices (especially food), energy and fuel bills and insurance costs.
“November data revealed an abrupt end to the steady improvement in order books seen since the summer. Unfavourable demand conditions were signalled in both domestic and export markets,” said Tim Moore, Economics Director at S&P Global Market Intelligence.
“Lower workloads led to a renewed slowdown in business activity growth across the UK service economy, with the latest expansion much softer than the post-pandemic trend. Moreover, staffing numbers were trimmed to the greatest extent since February.”
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