UK services firms reported the strongest outlook in a year as inflationary pressures ease, according to PMI

Output and new orders in Britain’s services industry increased last month, according to a survey released on Wednesday that showed expectations of activity in the next 12 months were the highest since October 2024.

The S&P UK Global Services Purchasing Managers’ Index (PMI) rose to 52.3 in October from 50.8 in September, and was higher than the preliminary reading of 51.1.

The survey of Britain’s dominant services sector is good news for Chancellor of the Exchequer Rachel Reeves, who has made growth her priority, ahead of possible tax rises in her annual budget on November 26.

“Companies noted strong customer demand, especially in the domestic market, despite increased business uncertainty and delayed decision-making on major spending ahead of the Budget,” said Tim Moore, Director of Economics at S&P Global Market Intelligence.

“Labor market conditions are finally showing signs of stabilization, with the pace of layoffs in the services sector slowing since September.”

Employment measures show that companies are not too quick to fire employees.

Meanwhile, the composite PMI, which also includes the strongest reading for manufacturing in a year, jumped to 52.2 from September’s final reading of 50.1. A Reuters poll had forecast a smaller rise to 51.1.

Services companies noted that higher wages pushed up input prices, even though the rate of cost inflation was the lowest since November 2024. Prices charged by companies increased at the slowest pace since June.

The Bank of England, which is widely expected to keep interest rates at 4% on Thursday, is watching services sector prices as it tries to assess inflationary pressures in the economy.

The PMI survey also showed strong orders – especially from domestic clients – which raised business expectations for next year.

However, there is hesitation among executives in making important decisions before Reeves’ budget. Reeves has warned of several tax increases as he tries to find money to improve public services and invest to help accelerate economic growth.
Source: Reuters