UK services sector shows ‘lacklustre’ growth in December but sentiment recovers

Growth in the UK’s services sector picked up at the end of 2025 amid signs of a recovery in confidence since the autumn budget, a new survey shows.

Nevertheless, business activity growth remained “lacklustre” last month, experts said.

The S&P Global UK services PMI survey scored a reading of 51.4 in December, up from 51.3 in November.

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

However, the PMI survey, which is watched closely by economists, was weaker than earlier estimates which had shown a “flash” reading of 52.1 for the month.

Respondents of the survey continued to report challenging conditions for businesses, with sales and customer spending held back by weaknesses in the UK economy and uncertainty about the political environment.

However, some firms pointed to signs of recovery in confidence among their clients after a prolonged period of nervousness in the lead up to the autumn budget.

This also resulted in a renewed upturn in the level of new work coming to firms, which was much faster than the average across 2025.

The PMI survey incorporates the responses of hundreds of companies across the UK’s services sector, which includes hospitality, entertainment and culture, finance and insurance, and real estate and business services.

Tim Moore, economics director at S&P Global Market Intelligence, said activity growth was “lacklustre” at the end of 2025.

But he added: “Modest growth of incoming new work was attributed to tentative signs of a recovery in client confidence after an extended period of pre-Budget gloom.

“However, survey respondents still noted sales headwinds linked to weak UK economic prospects, alongside challenging operating conditions due to factors such as sharply rising business costs and soft demand in major overseas markets.”

Staff numbers declined for the 15th month in a row and the PMI revealed that many businesses pointed to wage pressures and squeezed margins as reasons for not replacing employees that leave.

Matt Swannell, chief economic adviser to the EY Item Club, suggested that some business woes were soothed after the autumn budget, which did not include the same degree of tax rises as in 2024.

“With the tax rises announced at the autumn budget towards the bottom end of expectations, some businesses’ pre-Budget worries have eased,” he said.

“But concerns over political stability remain.

“While little signal can be taken from the month-to-month moves in the PMI, it will likely be difficult for the UK economy to gain momentum over the course of this year.”