The UK service sector remained in growth territory in December, numbers on Monday showed, though it was a largely tepid final quarter of the year.
The S&P Global UK service purchasing managers’ index rose to 51.1 points in December, from 50.8 in November but below the flash estimate of 51.4. Rising further above the 50 point neutral mark, the reading suggests growth accelerated last month.
‘Meanwhile, survey respondents were still cautious about the outlook for business activity in 2025. The degree of positive sentiment regarding growth prospects during the year ahead was unchanged from the 23-month low recorded in November. Service providers widely commented on concerns about cutbacks to business and consumer spending, alongside the impact of rising employers’ national insurance contributions,’ S&P Global said.
‘The latest reading signalled only a marginal expansion of business activity. Moreover, on average in the final quarter of 2024, the index was the lowest for one year.’
Sales pipelines were ‘subdued’, keeping a lid on growth last month. New order were ‘close to stagnation’.
‘The respective index was the lowest since October 2023 and pointed to only a fractional increase in total new work. Anecdotal evidence typically cited falling confidence among clients in the wake of the autumn budget, especially due to forthcoming increases in employers’ national insurance contributions. Where new business growth was reported, this was often linked to resilient demand for technology services,’ S&P Global added.
‘Lacklustre domestic and overseas economic conditions were commonly cited as weighing on customer demand. As a result, new export sales decreased for the first time since September 2023. Survey respondents commonly reported lower orders from EU clients, while some noted a boost from strong demand in US markets.’
A ‘weak spot’ was found in employment. Weaker staffing numbers have been reported in each of the past three months. The decline in employment in December was the steepest since January 2021, almost four years prior.
The composite PMI, calculated using the services and manufacturing readings, edged down fractionally to 50.4 in December from 50.5 in November. It was the lowest reading since October 2023 and just below the flash estimate which was also 50.5.
‘December data indicated a marginal reduction in new order volumes, thereby ending a 12-month period of expansion. Subdued demand and rising payroll costs meanwhile contributed to the sharpest fall in private sector employment since January 2021. Overall cost pressures were the highest since April. This led to a robust and accelerated rise in prices charged by UK private sector companies at the end of 2024,’ S&P Global said.
The S&P Global UK manufacturing purchasing managers’ index fell to an 11-month low of 47.0 in December, from 48.0 in November, numbers last week showed.
The services PMI features a panel of 650 firms. Responses were collected between December 5 and 19.
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