Growth in UK services sector reaches four-month high

Will Green is news editor of Supply Management
3 December 2015

Growth in the UK services sector reached a four-month high in November against the background of improving confidence and new product launches, according to a survey of buyers.

The Markit/CIPS UK Services Purchasing Managers’ Index climbed to 55.9 in November, compared to 54.9 in October and signalling the fastest rate of growth since July. A reading of 50 indicates no change.

There was a rise in incoming work, with new contracts linked to improving confidence, marketing efforts, new product launches and acquisitions.

Although new business rose at a faster rate in November, the volume of outstanding work grew only marginally, indicating a lack of pressure on operating capacity.

Service providers remained optimistic, on average, that activity levels would rise over the next 12 months, but the strength of sentiment was little changed from October’s two-and-a-half year low.

The data also signalled a further rise in average input prices, mainly due to salary pressures, in part linked to the forthcoming national living wage.

David Noble, group CEO, CIPS, said: “The services sector was at odds with the other sectors this month, offering a positive contribution to the UK economy with the highest growth of new work and overall business activity since July this year, leaving September’s lows far behind.

“Respondents were more willing to invest in marketing and new product launches, as optimism remained high, especially in the computing and IT sub-sector. Though growth in employment levels was maintained, the pace of hiring had slowed marginally, amidst concerns around higher wage bills and the continuing impact of the national living wage.”

Chris Williamson, chief economist at Markit, said: “For now, falling oil and energy costs are offsetting rising wage growth and keeping a lid on inflationary pressures, but the upturn in earnings growth raises question marks over just how long inflation, and therefore interest rates, will remain low for.”

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