UK service sector grew in every month of 2013

Gurjit Degun
6 January 2014

The UK service sector continued its strong expansion at the end of last year, with activity, new business and employment all continuing to rise.

The seasonally-adjusted Markit/CIPS UK Service Purchasing Managers’ Index read 58.8 in December. The figure was slightly below the 60 recorded in November - and is a six-month low - but continued to signal a historically strong rate of expansion above the 50 base line, which indicates growth. It also means the sector grew in every month of 2013.

Incoming new business also rose again, and the average growth rate for new work in the final quarter of last year was the best in the survey history.

Market confidence among service providers is at its highest in nearly four years, with clients having access to larger funds and willing to commit to new contracts. Optimism amongst the survey panel regarding activity over the next 12 months was at its highest since March 2010, with well over 50 per cent of respondents forecasting growth.

But capacity pressures also continued to rise in December, as backlogs of work rose for a ninth successive month, albeit at a slightly slower rate than the month previous.

Many companies responded to rising workloads by adding to their payroll. Employment rose for 12 successive months, and again at a historically sharp pace. Input prices continued to increase in December, and output price inflation also rose.

Markit chief economist Chris Williamson said: “The strongest expansions in the fourth quarter were seen in computing and IT, transport and communication, financial services and business-to-business services, all of which saw very similar strong rates of growth.

“The weakest sectors were hotels and restaurants and personal services. While these household-facing sectors have nevertheless seen decent growth, their underperformance is another reminder that this is not purely a consumer and housing driven boom that we are currently seeing.”

CIPS group CEO David Noble added: “Cost pressures, especially utility and energy prices, remained high in December but compared to previous times and given the upturn in activity, service providers have found confidence to push their own prices up to protect their margins.”

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