Service industry growth slows as firms hit by ‘sluggish’ demand

Activity in the UK’s service sector lost momentum last month as firms reported “sluggish” demand, according to new figures.

The S&P Global UK services PMI survey scored 51.8 in July, dipping from a reading of 52.8 in June.

Any reading above 50 means the sector is growing while a score below means it is contracting.

It was stronger than expected by economists, who had predicted a reading of 51.2.

The influential survey nevertheless pointed to slowing business activity in the face of “sluggish demand at home and abroad” amid another fall in new work for businesses in the sector.

Companies reported the fastest decrease in their order books for around two-and-a-half years.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK service providers recorded a third consecutive monthly rise in business activity but they were unable to maintain the growth rate achieved in June.

“Risk aversion and low confidence among clients were the main reasons provided for sluggish sales pipelines, alongside an unfavourable global economic backdrop.

“Hiring trends were especially subdued, with total workforce numbers decreasing to the greatest extent since February.”

Surveyed firms cautioned that “elevated global economic uncertainty” contributed to subdued confidence among clients and increased headwinds.

The fresh figures also showed another reduction in staffing levels, which firms linked to a combination of weaker demand and higher costs.

Matt Swannell, chief economic adviser to the EY Item Club, said: “The underlying pace of growth appears sluggish and is expected to remain that way.

“The services survey also reported a slight pickup in output price inflation in July, as businesses sought to pass on the impact of higher labour costs, although a 0.25 percentage point rate cut at the MPC’s (Monetary Policy Committee) meeting later this week is almost certain.”