New figures show British service companies experienced a significant surge in activity in April, marking the strongest growth in nearly a year.
The UK is now the second biggest services exporter in the world – behind only the US – with the services sector contributing around 80% of the UK’s GDP.
Britain’s services sector, which spans businesses including pubs and restaurants, property, financial services firms and transport, has been growing steadily for the past six months.
The S&P Global UK Services Purchasing Managers’ Index climbed to 55.0, its highest level since May 2023, indicating expansion. A mark above 50 represents economic growth, rather than contraction.
This uptick was supported by robust new orders, although it also brought the most pronounced increase in cost pressures since August, a trend likely to be noted by Bank of England officials convening next week to determine interest rates.
The inflationary pressure was attributed by many businesses to the 10% hike in the national minimum wage in April, along with rising salary costs, which contributed to a slight slowdown in employment growth.
Tim Moore, Economics Director at S&P Global Market Intelligence, noted that these survey results suggest the UK economy is on track to grow at a quarterly rate of 0.4%, further distancing itself from the shallow recession experienced last year. He said:
“The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4 per cent and therefore pulling further out of last year’s shallow recession.”
Mr Moore continued:
“Business activity expectations for the year ahead were upbeat overall in April, therefore adding to signs that the recovery in service sector performance has further to run.
“Election uncertainty and fading prospects for interest rate cuts were cited as headwinds on the horizon, but survey respondents still mostly reported positive sentiment towards their business investment plans and longer-term growth opportunities.”
More than half of the companies surveyed said they were expecting business activity to rise in the year ahead, while just a 10th were expecting a decline.
Source: S&P Global UK Services Purchasing Managers’ Index
