The December PMI results have recorded a further month of growth for the UK service sector with activity and incoming new business both recording their strongest rates since July.
This growth is supported by the sector’s success in converting enquiries into new business wins. The increased use of marketing tools has also supported sales.
Although the service sector experienced accelerated growth in December, operating conditions still remained challenging given the general theme of austerity as well as the economic difficulties of recent months.
Company margins also remained squeezed as competitive pressure increased, resulting, in some cases, in companies offering discounts in order to stimulate demand.
Figures from the seasonally adjusted Business Activity Index recorded 54.0 in December, a solid improvement on Novembers 52.1. Throughout 2011, growth in the service sector has been sustained each month with Decembers increased activity being driven by a similarly solid increase in new business.
Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said “December capped a year of reasonable growth for the UK service sector but significant risks still lurk under the surface, not least the outcome of on-going efforts to shore up Eurozone economies. Companies exposed to the poorer performing manufacturing and construction industries in particular will need to watch out for the impact of these dangers.
Selecting a winning pricing strategy will be the name of the game for many in the coming months, as the majority continue to grapple with higher cost inflation. Many businesses are already sacrificing profits and working harder to get the edge over their competitors. Some purchasing managers reported suppliers increasing prices and caution among customers – adding to the squeeze.
With a tough operating environment, little sign of stronger sustainable growth, and a great deal of uncertainty about prospects for 2012 weighing down on confidence, it appears unlikely that there will be any real motivation to hire new staff for some time.”
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