'Dark clouds of political indecision' hang over UK services

Will Green is news editor of Supply Management
5 September 2018

Business optimism in the services sector hit a five-month low in August despite stronger growth.

The IHS/Markit UK Services Purchasing Managers’ Index rose to 54.3 in August, up on 53.5 in July and against the no-change reading of 50.

Service providers experienced a solid increase in business activity and incoming new work, with employment growth at its fastest for six months.

But anecdotal evidence suggests Brexit uncertainty continued to hold back business-to-business spending, especially in relation to large-scale projects. Some survey respondents also cited subdued demand from clients in the UK retail sector.

Difficulty recruiting suitably-skilled staff contributed to higher salary payments in August, while respondents also mentioned rising fuel costs and energy prices.

Intense competitive pressures meant inflation in prices charged was only modest.

Duncan Brock, group director at CIPS, said: “Though the sector remained in positive territory, the dark clouds of political indecision are still having an effect and preventing more business activity.

“Service providers are likely to continue along this vein for the rest of the year until those clouds have cleared.”

Chris Williamson, chief business economist at IHS Markit, said: “Faster service sector growth comes as much needed welcome news after disappointing manufacturing and construction PMI surveys in August.

“The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.”

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