UK services growth accelerates in March

CIPS 7 April 2015

Strongest rate of growth since August 2014

Markit/CIPS UK Services PMI®

Key Points: 

  • Strongest rate of growth since August 2014
  • Overall growth in first quarter stronger than in final three months of 2014 
  • Negligible rise in charges highlights lack of inflationary pressure 


Service providers in the UK reported a stronger increase in business activity in March, according to the latest PMI® survey data from Markit and CIPS. The rate of expansion accelerated to a seven-month high, driven by a stronger rise in new business. Growth over the first quarter as a whole was faster than that seen in the final three months of last year. Moreover, the volume of outstanding business rose at a faster rate, despite a further marked increase in employment. Price pressures remained subdued, with input price inflation unchanged from February and prices charged by service sector companies barely rising in March.

The headline figure for the survey is the seasonally adjusted Markit/CIPS UK Services Business Activity Index, a single-figure measure designed to track changes in total UK services activity compared with one month previously. Readings above 50.0 signal growth of activity compared with the previous month, and below 50.0 contraction. The Index rose to 58.9 in March, from 56.7 in February, indicating a marked pace of expansion that was the fastest since August 2014. Over the first quarter of 2015 as a whole the Index averaged 57.6, a better outcome than the 56.9 posted in Q4 2014, the lowest of any quarter since Q2 2013.

Growth in activity was attributed by survey respondents to a wider economic recovery, improving confidence, winning new customers and new product development. Higher workloads also reflected a further marked increase in the volume of new business, which rose for the twenty-seventh consecutive month. Moreover, the rate of growth in new contracts accelerated to the highest since last September.

The longer term outlook held by service providers also improved in March. Business expectations were at their strongest since May 2014, with positive sentiment linked to marketing campaigns, new products, foreign investment, export demand and an improving construction sector. That said, there was a degree of uncertainty associated with the upcoming general election, which partly weighed on expectations.

The underlying strength of business conditions in the services economy was further highlighted by a marked rise in employment. The rate of job creation eased to a three-month low, but was strong overall and broad-based by sub-sector. Despite ongoing workforce growth, the volume of outstanding business continued to rise, and at the fastest rate since last September.

Input cost inflation remained historically muted in May, despite evidence of rising wage pressures. A number of firms commented that the weaker euro had dampened inflationary pressures during the month. Meanwhile, service providers raised their own charges at only a fractional rate.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply:

“A flood of confidence emanated this month as business optimism and activity remained high and the sector established itself on a robust path to sustainable success. 

Though the rate of increase in levels of employment was not as high as at the beginning of the year, the continuous 27-month rise in employment opportunities will please job seekers. Skills shortages, however, were still in evidence and the demand for higher salaries from skilled staff impacted on input costs for businesses. They were also subjected to higher charges levied by suppliers where previously they had enjoyed respite with lower energy prices contributing to lower overall costs. 

However, suppliers themselves were under increased pressure as both a rise in new business and the demands of outstanding work weighed heavily on capacity and fulfilment.

The heightened positivity for the future resulted in new marketing campaigns, and new products as competition increased. This, combined with the rise in activity in the construction and manufacturing sector, all points toward an overall healthier UK economy.”


The April Report on Services will be published on Wednesday 6th May 2015 at 09:30.

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