UK's services sector growth slows as squeezed households cautious about spending

04 April 2024 , 11:21

907     0

The services sector continued to grow last month, but not as much as expected (Image: PA Archive/PA Images)

The UK's services sector, which includes everything from banking to waiting tables, continued to grow last month, but not as much as predicted, according to a new survey.

The S&P Global UK services PMI survey gave the sector a score of 53.1 in March, which was lower than February's 53.8, but still above 50, which means the sector is growing. This score was also slightly worse than what economists had predicted they thought it would be 53.4.

S&P said there was a "solid increase in business activity" but it wasn't as strong as in February because the growth in new work slowed down a bit. New work was still growing, but at the slowest rate in four months.

The PMI surveys also look at the construction and manufacturing sectors each month. But because the UK relies so much on its service economy, this survey is one of the key indicators of economic growth,

Businesses reported that "squeezed disposable household incomes and elevated interest rates" had continued to push down demand in March. They also said that increasing wages and rising transport costs had pushed up their costs.

Martin Lewis’ MSE website shares tip to get free £175 and 7% interest on savings

Meanwhile, the rate of jobs being created was the slowest so far this year. Tim Moore, economics director at S&P Global Market Intelligence, said: "A stabilisation in housebuilding meant that UK construction output was virtually unchanged in February."

"This was the best performance for the construction sector since August 2023 and the forward-looking survey indicators provide encouragement that business conditions could improve in the coming months. Total new orders expanded for the first time since July 2023, which construction companies attributed to rising client confidence and signs of a turnaround in the residential building segment."

"Meanwhile, the degree of optimism regarding year ahead business activity prospects was the strongest since the start of 2022, in part due to looser financial conditions and expected interest rate cuts. However, a protracted downturn in activity has made construction companies cautious about their employment numbers."

"Staffing levels dropped for the third time in the past four months and the latest round of job shedding was the steepest since November 2020."

Lawrence Matheson