Economic Buzz: UK services sector output falls for first time in over a year

The UK service sector saw a setback in May as output levels declined for the first time since April 2025, according to the latest S&P Global PMI survey. The Services PMI Business Activity Index dropped from 52.7 in April to 49.3, slipping below the 50.0 threshold that signals contraction.

The fall was linked to weaker demand, with new work declining for the third month in a row. Firms cited subdued consumer spending, particularly in travel, tourism and leisure, alongside economic and political uncertainty. Export sales also softened due to global conditions and competition. Backlogs of work fell at the fastest pace since November 2025, while employment dropped at the strongest rate since February, as companies adopted cautious hiring amid rising wage inflation.

Cost pressures remained intense, with input prices climbing sharply, driven by energy, fuel, transport, wages and technology costs. Output charge inflation stayed strong, though eased slightly from April?s 39-month peak.

Business confidence weakened, with expectations for the year ahead the lowest since April 2025. The UK Composite PMI Output Index also fell below 50.0, registering 49.7, pointing to the weakest private sector performance in 13 months as service sector weakness outweighed manufacturing growth.

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