UK Service Sector Slips Into Contraction

The UK service sector contracted in April for the first time since October 2023, reflecting renewed downturn in order books, final purchasing managers' survey data from S&P Global showed on Tuesday.

The services Purchasing Managers' Index declined to 49.0 in April from 52.5 a month ago. The reading was slightly above the initial estimate of 48.9.

The survey showed that new business intakes decreased for the third time in the last four months. Respondents cited weaker business investment and client confidence in the wake of US tariffs and subsequent financial market turmoil. New work from abroad logged its fastest fall since February 2021.

Reduced workloads and delayed spending decisions resulted in another fall in backlogs of works. Firms were cautious regarding hiring and the pace of job shedding accelerated since March.

Input costs increased due to rising National Living Wage rates and National Insurance contributions. Consequently, firms raised their output charges at the fastest rate in just under two years.

There was a sharp downturn in expectations for the year ahead. The degree of optimism was the lowest since October 2022.

The survey showed that overall private sector also shrank in April, which was the first decline in one-and-a-half years. The final composite output index registered 48.5 in April compared to 51.5 in March. The flash reading was 48.2.