4th Feb 2026 09:51
(Alliance News) - The UK's service sector activity growth was slower than expected in January as workforce levels seemed to have declined faster than in December, data published by S&P Global showed Wednesday.
The S&P Global UK services purchasing managers' business activity index climbed to 54.0 points in January from 51.4 in December, but lower than the first estimate of 54.3 points. Growing further above the neutral 50-point mark separating growth from contraction, it indicates the pace of UK service sector growth accelerated in January.
Total new business climbed "at a solid pace" at the start of 2026, S&P Global said, while higher levels of business activity were linked to greater confidence among clients, new project starts and a post-budget improvement in investment sentiment.
"The latest survey indicated a faster decline in workforce levels than in December. Anecdotal evidence highlighted squeezed margins, fragile market conditions and efforts to boost productivity through automation as reasons for the nonreplacement of voluntary leavers," S&P Global said.
Tim Moore, economics director at S&P Global Market intelligence, noted that output growth was the fastest for five months, amid post-budget clarity, with some respondents citing rising export sales.
He added: "Despite a recovery in total new work, service providers still reported that consumer demand was constrained by squeezed disposable incomes, while risk aversion in response to geopolitical tensions was a factor holding back business spending.
"Service sector companies appear cautiously optimistic about their growth prospects for the next 12 months, with confidence the highest seen since October 2024. However, there were again gloomy signals for the UK labour market outlook as staff hiring decreased at a steeper pace in January as firms looked to offset rising payroll costs. Another sharp increase in overall input prices contributed to the fastest rate of output charge inflation for five months."
The UK composite PMI output index rose to 53.7 points in January from 51.4 points in December. It was lower than the first estimate of 53.9 points.
S&P Global said: "Adding to signs of a turnaround in demand conditions, latest data pointed to the strongest rise in total new work and the highest business optimism since September 2024. However, private sector job losses accelerated since December. Prices charged inflation intensified at the start of 2026, with the latest reading the highest since August 2025. This was despite a slight slowdown in overall input cost inflation."
The composite PMI is calculated using a service sector reading and the manufacturing data published Monday.
On Monday, S&P reported that the S&P Global UK manufacturing purchasing managers' index jumped to a 17-month high of 51.8 points in January, from 50.6 points in December, beating the first estimate of 51.6 points.
The PMI features a panel of 650 service sector companies in the UK, with responses collected between January 12 and 28.
By Tom Budszus, Alliance News slot editor
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