UK services growth hits 17-month high

Will Green is news editor of Supply Management
5 January 2017

Growth in the UK services sector hit a 17-month high in December, driven by a rise in new business, according to a survey of buyers.

New business growth was the strongest since July 2015 and anecdotal evidence linked this to marketing, new product launches, government contracts and exports.

The Markit/CIPS UK Services Purchasing Managers’ Index rose to 56.2 in December, up on 55.2 in November and against the no-change reading of 50.

Cost pressures remained elevated, with input prices rising at the second-fastest rate since April 2011, linked to the weaker pound.

Higher prices were associated with food, fuel, labour, IT and oil-based items such as packaging. As a result service providers raised their charges at the fastest rate since April 2011.

David Noble, group CEO, CIPS, said: “Business optimism was solid, as firms increased their marketing efforts and launched new products in readiness for improved business conditions continuing into 2017.

“However, sentiment was lower that the survey’s long-run average, as the sector continued to stabilise after the ongoing impacts of the EU referendum result. The sector will need a persuasive argument as the terms of Brexit are negotiated for this broad-based recovery to be maintained in the new year.”

Chris Williamson, chief business economist at IHS Markit, said: “Collectively, the PMI surveys point to the economy growing by 0.5% in the fourth quarter, with growth accelerating to a 17-month high at the year end.”

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