[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Service sector growth grinds to seven-month low

Last month saw the UK’s service sector expand at the weakest level recorded since March, with continued Brexit uncertainty thought to be hindering growth.

Survey finds a drop in business confidence ©iStock
Survey finds a drop in business confidence ©iStock

The findings from the latest IHS Markit/CIPS UK Services PMI survey also show that new work increased at the slowest pace observed in more than two years.

Business growth moderated for the third time in the past four months, a rate of subdued job creation continued, and cost burdens were the highest recorded since June.

Some businesses said Brexit uncertainty and concerns about the global economy had contributed to the downturn, while a number reported restrained consumer spending.

IHS Markit chief business economist, Chris Williamson, said heightened geopolitical uncertainty, trade wars, and tightening financial market conditions were all taking their toll.

“It therefore remains unclear as to the extent to which Brexit worries are exacerbating or obfuscating a more broad-based slowing of the economy,” he added.

The service sector moved down from 53.9 to 52.2 in the IHS Markit/CIPS business activity index last month, with any score above 50 signifying an improvement, and anything below that a deterioration.

Combined with analysis of the manufacturing and construction sectors, Williamson said the findings point to quarterly GDP growth of just 0.2%.

Looking ahead, the latest survey suggests a drop in business confidence, with the degree of positive sentiment about the next 12 months the weakest recorded since July 2016.

Some firms said imminent clarity around the UK’s relationship with the EU could boost confidence, while many others saw a deepening malaise due to Brexit-related disruptions.

“A reluctance to commit was the message coming through from service providers in October as the sector checked in with its lowest optimism since July 2016,” CIPS group director, Duncan Brock, said.

“Clarity around Brexit may turn this around, but time is running out, and this downward slide should be a wake-up call that progress must be made now.”

Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession