These UK businesses have been shedding jobs for 16 months straight – and are now on the longest losing streak in 16 years
Employment numbers in the UK’s service sector have decreased in each month since October 2024, which represents the longest period of job shedding for 16 years.
This is according to S&P Global’s latest PMI data, which shows that staff hiring remained a weak spot for the service economy, despite signs of a recovery in business activity and incoming new work.
The sectors covered include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.
Anecdotal evidence highlighted squeezed margins, fragile market conditions and efforts to boost productivity through automation as reasons for the non-replacement of voluntary leavers.
Despite the negativity around jobs, there were promising signs for the sector when it comes to orders and new business, leading to increased confidence.
The headline seasonally adjusted S&P Global UK Services PMI Business Activity Index registered 54.0 in January, up from 51.4 in December and above the 50.0 no-change mark for the ninth consecutive month. Moreover, the latest reading signalled the fastest pace of expansion since August 2025.
Higher levels of business activity were linked to greater confidence among clients, new project starts and a post-Budget improvement in investment sentiment. However, there were also many reports that geopolitical uncertainties and fragile consumer demand had weighed on growth in January.
Total new business increased at a solid pace at the start of 2026. The pace of expansion hit a three-month high, but remained weaker than the long-run survey average.
Service providers commented on a general upturn in clients’ willingness to spend. Improved order books were also attributed to increased digital marketing budgets and investments in new technologies. Subdued household spending and lacklustre demand from construction sector clients were cited as holding back sales in some cases.
An increase in costs
Efforts to protect margins from rising business costs led to another robust and accelerated increase in prices charged by UK private sector companies. The latest rise in output charges was the steepest since August 2025 and remained well above its long-run average.
Looking ahead, more than half of the survey panel (52%) predict an upturn in their business activity over the next 12 months, while only 12% foresee a reduction. The resulting index signalled the highest level of service sector optimism since October 2024.
Service providers typically noted improved sales pipelines due to more upbeat sentiment among clients and expected investment spending. Some firms commented on hopes of a boost to customer spending from a rebound in construction activity and real estate development in 2026, supported by lower borrowing costs.
There were nonetheless, many reports of challenging business conditions across the hospitality and leisure sector, as well as widespread concerns about rising business costs and subdued long-term UK economic growth prospects.
“Service sector companies appear cautiously optimistic about their growth prospects for the next 12 months, with confidence the highest seen since October 2024,” said Tim Moore, Economics Director at S&P Global Market Intelligence.
“However, there were again gloomy signals for the UK labour market outlook as staff hiring decreased at a steeper pace in January as firms looked to offset rising payroll costs. Another sharp increase in overall input prices contributed to the fastest rate of output charge inflation for five months.”
