UK service providers have cut employment for a fifth consecutive month, according to the latest S&P Global purchasing managers’ index (PMI), marking the longest run of job shedding since early 2011 outside of the pandemic period.
The survey points to concerns over a “loss of growth momentum” since the autumn budget, with many firms attributing belt-tightening to the Chancellor’s announcement of a £25 billion increase in employers’ National Insurance contributions.
Tim Moore, Economics Director at S&P Global Market Intelligence, noted that the sector has witnessed a “clear loss of growth momentum” in recent months. While official estimates from the Office for National Statistics still put the UK unemployment rate at a historically low 4.4 per cent, the PMI survey data suggest businesses remain cautious about hiring, especially amid mounting cost pressures.
Economists caution that the PMI figures may overstate the pace of slowdown. Rob Wood, Chief UK Economist at consultancy Pantheon Macroeconomics, argues that the indicator “exaggerates economic weakness” because it gauges only the number of firms reducing output or cutting staff, not the extent of the reductions.
Meanwhile, attention is turning to the spring statement on 26 March, where the Chancellor is expected to contemplate further cuts in public spending to stay within her fiscal rules. The Office for Budget Responsibility is tipped to warn that the Chancellor’s £9.9 billion fiscal buffer, outlined last October, has all but evaporated under the weight of higher government bond yields and tempered economic growth.
February’s final services PMI reading edged up to 51 from 50.8 in January, surpassing the critical 50-point threshold that separates expansion from contraction. However, that figure was a slight downgrade from the earlier flash estimate. Across the broader UK private sector, the composite PMI slipped marginally from 50.6 to 50.5, pointing to a sluggish start to the first quarter.
Thomas Pugh, Economist at RSM UK, remarked that these subdued figures hint at “more of a flatline in economic activity,” though he also shares the view that the PMI readings may be underestimating actual growth. Some analysts suggest that lingering impacts from President Trump’s tariffs continue to weigh on UK manufacturing in particular, given that sector’s vulnerability to shifting trade barriers.
