UK Services Sector Continues Expansion in December

The S&P Global UK Services PMI fell to 51.2 in March of 2026 from 53.9 in the previous month, firmly below market expectations that it would ease to 53 to mark the softest pace of expansion since September of last year, according to a flash estimate. New work for service providers slowed amid pressure from the fastest decline in orders from abroad in nearly one year, with foreign clients citing the postponement of new projects in the Middle East and the reduction of international travel. In the meantime, service providers noted a sharp increase in average cost burdens, also related to halted shipping routes from the war in the Middle East. The squeezed margins and softer orders growth drove companies to lower their hiring pace. Lastly, the continued geopolitical risks from the war pressed optimism for service providers.

The S&P Global UK Services PMI was confirmed at 53.9 in February 2026, just below January’s 54 five-month high. Growth was supported by gradually improving client confidence and the release of pent-up demand, though conditions remained challenging in sectors such as leisure, hospitality, and construction. New business increased for a third straight month, driven mainly by domestic demand, while export growth nearly stalled amid weak European conditions. Backlogs were broadly stable, as higher new orders were offset by productivity gains and tech investment that reduced the need for extra hiring. Employment fell for the seventeenth consecutive month, reflecting hiring freezes and cost pressures. Input prices rose sharply, largely due to higher wages and supplier costs, and firms passed these on through robust price increases. Despite slightly easing optimism, around half of firms expect output to rise over the next year.

The S&P Global Flash UK Services PMI edged down to 53.9 in February 2026 from 54 in January, but above forecasts of 53.5, flash estimates showed. Services activity extended its expansion to ten months, with growth remaining broadly in line with January’s five-month peak. New orders rose further amid a sustained recovery in domestic demand, despite fragile economic conditions. Demand from abroad increased only modestly, with a number of firms noting subdued sales to EU markets. Meanwhile, payroll numbers continued to decline, as companies remained focused on boosting productivity to cut costs. On the price front, average cost burdens and output charges rose sharply in February, mostly attributed to elevated wage pressures.