Investment in new projects is down as companies take a wait-and-see approach, S&P says
Businesses in the UK’s service sector posted their biggest decline in activity in October since January 2021, according to a report by Standard and Poor’s released on Thursday.
The S&P Global UK Services Purchasing Managers’ Index (PMI) fell to 48.8 points last month, down from 50.0 in September, marking the worst reading since the pandemic-affected print in January 2021. A level below 50.0 signals a contraction, while a reading above that indicates an expansion.
According to the survey, political uncertainty, rising borrowing costs, and “stubbornly” high inflation dented business investment and encouraged a wait-and-see approach to new undertakings.
“There were also many reports that higher energy bills had led to reduced spending on non-essential services,” economics director at S&P Global Market Intelligence Tim Moore said.
He noted that the latest rise in business expenses, driven by further steep increases in energy costs and staff wages, was faster than at any time in the survey’s history prior to the pandemic.
“Aside from the slump at the start of the pandemic, the degree of confidence across the service economy is now the lowest since December 2008,” Moore added.
Experts say that the PMI reading, along with other indicators, points to the British economy entering a recession. The country’s GDP fell by 0.2% on a quarterly basis in October.
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