UK business activity fell in September to the lowest level since January 2021, when the country was in lockdown, according to a survey released on Wednesday.
The S&P Global/CIPS composite PMI – which measures activity in both the services and manufacturing sectors – fell to 49.1 in September from 49.6 in August, coming in below the 50.0 mark that separates contraction from expansion for the second month in a row but above the flash reading of 48.4.
Meanwhile, the PMI for the services sector declined to 50.0 from 50.9 in August as inflationary pressures dented discretionary spend, but was ahead of the flash reading of 49.2. Still, this marked the weakest service sector performance since the national lockdown in February 2021.
The survey pointed to a loss of momentum for the service sector, with an 18-month period of output expansion coming to an end amid falling volumes of incoming new work. S&P said shrinking client demand was widely put down to pressure on household budgets from escalating inflation, as well as pessimism about the economic outlook.
Tim Moore, economics director at S&P Global Market Intelligence, said: “September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending.
“Severe pressure on budgets in the wake of rising inflation, alongside deepening worries about the economic outlook, also led to a reversal in new order volumes for the first time since February 2021. “Employment trends remained positive in September, with staff numbers increasing at a strong pace as service providers adjusted to post-pandemic requirements. However, the pace of job creation has now slowed for three months running amid greater caution about future growth and sporadic reports of hiring freezes.
“Wage pressures due to shortages of candidates to fill vacancies were widely reported by service companies in September, which added to pressure on business expenses from escalating energy costs. The overall rate of input price inflation nonetheless eased slightly to its lowest since December 2021, helped by falling fuel prices and transportation costs.”
