UK Services Activity Stays Firmly in Expansion Territory

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.

The S&P Global UK Services PMI rose to 54 in January from 51.4 in December, below preliminary estimates of 54.3 but still the highest since August 2025. New business grew at a solid pace and reached a 3-month high, supported by higher client spending, digital marketing budgets and investment in new technologies, while subdued household demand and weak construction activity weighed on some sectors. Export orders rose modestly, with firms citing stronger demand from Europe, particularly Ireland. Employment remained under pressure, with staffing levels falling for a fourth straight month and marking the longest period of job losses in 16 years, as firms focused on cost control and automation. Input costs rose sharply, driven mainly by higher payroll, technology and raw material costs, prompting the steepest increase in prices charged since August 2025. Business optimism improved to the highest since October 2024, although concerns about costs and long-term growth persisted.