3rd Jul 2026 09:46
(Alliance News) - UK services activity contracted at the sharpest pace in nearly three-and-a-half years in June, as weak demand, geopolitical uncertainty and rising cost pressures weighed on business conditions, purchasing managers' index survey results from S&P Global showed on Friday.
The final seasonally adjusted services PMI business activity index fell to 48.8 points in June from 49.3 in May, remaining below the 50-point mark that separates growth from contraction.
The reading was a notch above the flash estimate of 48.7 points published in late June.
The final composite output index, which combines services and manufacturing, declined to 49.3 points in June from 49.7 in May, and came lower in than the flash reading of 49.4. It marked the weakest reading since April 2025.
S&P Global said service sector business activity fell for a second month running, with the rate of decline the steepest since January 2023.
New orders declined for a fourth consecutive month and at the fastest pace since November 2022. UK service providers cited weak domestic economic conditions, client risk aversion linked to the Middle East conflict, domestic political uncertainty, and elevated global inflationary pressures.
Export orders also fell, with subdued demand from European clients offsetting stronger sales to the US.
Employment across the service sector declined again, with the pace of job losses the sharpest since February, as firms responded to weaker workloads and margin pressure.
"June data confirmed a clear loss of momentum for the UK economy during the second quarter of 2026, following a positive start to the year," said Tim Moore, economics director at S&P Global Market Intelligence.
"There was better news on the inflation front, as the latest increase in input prices was the slowest since March and well below April's recent peak."
Input cost inflation eased further from April's 41-month high, helped by lower fuel prices, although firms continued to report higher wages, transport bills and technology costs. Output price inflation slowed to its weakest since February.
Business confidence improved slightly from May's 13-month low, supported by hopes for a durable US-Iran ceasefire and business development plans, but remained well below its long-run average.
On Wednesday, S&P Global have reported the seasonally adjusted UK manufacturing PMI at 52.5 points in June, down from May's four-year high of 53.9 points and below the earlier flash estimate of 53.1.
The services PMI is compiled from responses to questionnaires sent to a panel of around 650 service sector companies in the UK. Responses are collected during the second half of each month.
By Eva Castanedo, Alliance News reporter
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