UK services 'leap into action'

Will Green is news editor of Supply Management
5 February 2020

Business activity in the UK services sector rose for the first time in five months in January, according to the latest PMI.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index returned to growth, rising to 53.9 in January, up on 50 in December. Readings above 50 signal expansion, and below indicate contraction.

Survey respondents said headwinds from delayed political decision-making had lifted since the General Election, with business activity expanding for the first time since August last year.

Rising demand for staff pushed up operating expenses and, coupled with increased fuel and transportation costs, the rate of input price inflation was the strongest for four months. Average prices charged by service providers rose at the fastest rate since June 2018.

Duncan Brock, group director at CIPS, said: “The UK service sector leapt into action in the New Year with a welcome return to stronger business activity and an optimism not seen for almost five years.

“New work flowed in at a surprisingly sharp rate as businesses started to invest and previously uncertain consumers parted with their cash. Orders held back by political uncertainty were uncorked at the fastest rate for around a year and a half.

“This renewed pipeline of work was powered primarily by a rise in domestic activity as export business remained fairly hesitant with only modest improvement. European orders in particularly were slow and clients cited continuing Brexit-related uncertainty for holding them back.”

Tim Moore, economics associate director at IHS Markit, said: “With the vast majority of PMI survey data collected prior to 23 January, we’ve yet to see any overall impact on business conditions from the Wuhan coronavirus outbreak, but disruptions to global supply chains and international travel could present risks to the UK economy and key trading partners in the coming months.”

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