Services sector picks up in October as outlook for firms hits year-high

Growth in the UK services sector accelerated last month as firms pointed towards their strongest outlook for a year, according to new figures.

Businesses in the sector, which includes retail, hospitality and financial services, also reported that cost inflation waned to its weakest level for 11 months.

The S&P Global UK services PMI survey scored a reading of 52.3 in October, improving from 50.8 in the previous month.

Any reading above 50.0 means the sector is growing, while any score below means it is contracting.

The closely watched survey was stronger than expected, with economists predicting a reading of 51.1.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The latest survey offered some positive signals for the UK service economy, with output growth stronger than the earlier ‘flash’ estimate for October, and therefore confirming a notable improvement from September’s five-month low.

“Similarly, the rate of new business expansion gained momentum, with the latest upturn among the strongest seen over the past year.

“Service providers typically commented on a turnaround in new client wins and better-than-expected sales performances in October.”

Many firms reported resilient customer demand in domestic markets, despite business uncertainty and delayed decision-making ahead of next month’s autumn Budget.

Meanwhile, new work from abroad decreased for the second month running amid “sluggish global demand” and fragile investor sentiment.

Nevertheless, the data found that surveyed businesses held their most optimistic expectations for the next year since October 2024.

Around 47% of surveyed businesses forecast a rise in activity over the next year, with only 9% pointing to decline.

Investment in new technology, a turnaround in sales pipelines and lower borrowing costs were all flagged as contributing to this improvement in outlook.

It came as companies also highlighted that their cost inflation, while still elevated, had dipped to the lowest level since last November.