Britain’s service sector ends year with stronger-than-expected growth
Britain’s service sector grew at the fastest rate in December for six months, beating expectations as firms ended the year in higher spirits.
The S&P Global/CIPS UK services PMI survey showed a reading of 53.4 in December, up from 50.9 in November.
The score came in higher than the score of 52.7 that economists had been expecting, according to a consensus figure compiled by Pantheon Macroeconomics.Any score above 50 indicates that the sector is growing.
Businesses in the UK’s sprawling service industry, which spans restaurants and pubs to healthcare and financial firms, were buoyed by stronger levels of demand during the typically busier festive season.
The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024
Tim Moore, economics director at S&P Global Intelligence
Some firms said consumer spending on leisure and hospitality services was better than expected at the end of 2023.
Other respondents of the influential PMI survey said they had seen a tentative improvement in demand from clients, especially among firms in technology and financial services.
Tim Moore, the economics director at S&P Global Market Intelligence, said the sector ended the year “on a high” with growth accelerating at the fastest rate since June.
“The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024,” he said.
“However, many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.”
Staff hiring remained weak in December amid significant concerns about the cost of higher wages, with workers receiving higher pay to help ease cost-of-living pressures.
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The survey suggested that more firms had initiated hiring freezes, stopped replacing voluntary leavers and pushed through some redundancies toward the end of the year.
Nonetheless, businesses reported feeling more upbeat about the future in December.
The overall level of optimism was the highest since May, with companies expecting activity to increase over the next 12 months and feeling hopeful that economic conditions could improve.
