Financial services was the main driver of growth ©PA Images
Financial services was the main driver of growth ©PA Images

Strongest growth this year for services sector

5 April 2017

The UK services sector has experienced its strongest rise in activity so far this year, led by financial services, a survey of buyers has shown.

Business activity and incoming new work rose at their strongest rates of 2017, and almost half of respondents were forecasting growth, according to the March Markit/CIPS UK Services PMI

The index rose to 55.0 in March, up from 53.3 in February. A score above 50 indicates growth while a score 50 below signifies contraction. 

This was the only sector whose PMI score increased last month, defying the slowdown in construction and manufacturing, said Duncan Brock, CIPS director of customer relationships. “A stronger end to the first quarter from the biggest contributor to UK GDP will provide some relief to the UK economy as a whole, shaken and stirred by continuing highs and lows since the Brexit vote,” he said.

The stronger activity, led by financial services, was attributed to good economic conditions and greater client demand. Hotels, restaurants and other consumer services were the worst performing businesses in the sector.

Some respondents also reported that the lower value of the pound had increased demand from overseas. “The weak pound gave reasons to be cheerful for exporters who reported renewed interest from overseas markets, especially clients based in the US,” said Brock.

But job creation, at its lowest level since August, was a “blot on the sector’s performance” Brock said. Average prices charged by the sector had also increased at the fastest rate in more than eight years, linked to higher input costs.

“Higher prices are likely to trickle further down the supply chain to consumers,” said Brock. “Businesses will stop absorbing additional costs for basics such as energy and food to remain profitable.”

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