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The Actuary The magazine of the Institute & Faculty of Actuaries

Service sector hiring stalls as prices rise

Recruitment in the UK’s service sector last month failed to significantly improve on October’s seven-month low, with the rate of job creation remaining unchanged.

Hiring stalls in service sector ©Shutterstock
Hiring stalls in service sector ©Shutterstock

That is according to the latest IHS Markit/CIPS UK Services PMI survey, which shows that business growth also slowed in November as firms continued to report high operating costs.

The data shows that input price inflation is the strongest recorded since the first half of 2011, with efforts to alleviate pressures on margins resulting in the fastest rise in prices charged since February 2008.

“This paints a disappointing portrait of a sector struggling against Brexit-related uncertainty as fewer jobs were created and overall activity dropped back from October’s six-month high,” CIPS director, Duncan Brock, said.

“Businesses could no longer fight against the tide of higher prices for food, fuel and salaries as input cost inflation remained close to its strongest for six years, and businesses passed these increases on to consumers.”

The service sector fell from 55.6 in October to 53.8 in the IHS Markit/CIPS business activity index last month, with any value above 50 signifying an improvement, and anything below that a deterioration

This marks 16 consecutive months above the 50 no-change value, however, service providers’ optimism for the year ahead remained much weaker than the long-run survey average.

In addition, a rising volume of unfinished work for the third time in four months is thought to reflect recruitment difficulties and firms’ operating capacities becoming stretched.

Despite this, positive improvements in two other PMI surveys for manufacturing and construction lead IHS Markit business economist, Chris Williamson, to forecast “robust” growth of 0.45% in the final quarter.

“A sufficient degree of optimism in pockets of the economy, notably financial services, tourism, manufacturing and house building, is helping the economy as a whole to sustain steady growth,” he said.

“But the big news is in relation to prices, which suggest that inflationary pressures have yet to peak.”

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