Successful marketing campaigns boost UK services sector

6 January 2016

Continued, modest and stable growth characterised the UK services sector in the last month of 2015, according to a survey of buyers.

A strong increase in new business, due partly to successful marketing campaigns, and the steepest rise in volumes of outstanding business since August, resulted in a reading of 55.5 in December’s Markit/CIPS UK Services Purchasing Managers’ Index, down on 55.9 in November but above the average of 55.4 recorded over the second half of 2015. A score of 50 signals no change.

However, growth in the second half of 2015 was lower than average growth for 2015 as a whole (56.7) and 2014 (58.2). In addition, the rate of job creation recorded was the weakest since July 2015, and while firms predict solid overall growth in activity during 2016, expectations were the lowest since February 2013.

David Noble, group CEO, CIPS, said: “With increased business margins as a result of ongoing lower fuel and commodity prices, wages were up. Businesses tried to retain talented staff by rewarding good performance and continuing to increase capacity to meet further strong growth in new business. Some respondents reported the enduring difficulty of finding skilled individuals when needed."

Markit’s chief economist Chris Williamson said the services sector was instrumental to the UK’s economic upturn during December, helping to offset the recent weaknesses seen in manufacturing, and contributing to expected GDP growth of between 2 and 2.5 per cent in 2016.

“A rosy outlook is by no means assured, however,” he warned. “The cost impact of the [national] living wage, government spending cuts, a potential hike in interest rates, global economic growth jitters and of course Brexit are all weighing on business minds and pose significant downside risks to economic growth in 2016.”

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