UK services industry ends 2023 on a high, posting fastest growth rate for six months

Fri 5 Jan 2024
Posted by: Phillip Adnett
Trade News
City of London skyline including the Shard

The UK services industry experienced its fastest rate of growth for six months in December 2023, reflecting positive momentum for the sector, according to newly released economic data.

According to the latest Purchasing Managers’ Index (PMI) by S&P Global, the services industry posted a 53.4 rating at the end of last year.

Any reading below 50 represents a contraction in the sector, while anything above 50 indicates growth.

Two months in a row

December’s 53.4 was up from the 50.9 registered in march. S&P Global said that this pointed to “a solid increase in business activity that was the fastest since last June”.

The positive reading was attributed to more demand from clients and an upturn in new work for firms.

Services success

Marco Forgione, director general of the Institute of Export & International Trade (IOE&IT), said:

“It is already known that the UK is a global services superpower any data showing an increase in the services sector can only be good news for the country.

“IOE&IT's recent report ‘Global horizons: realising the services exports potential of UK nations and regions’ demonstrates why we excel in this area. It is vital that we maintain our global advantage as an exporter of services and one of the key recommendations of our report was creating regional sector specialisations – which, if implemented, will improve regional outputs. We have a clear pathway to continue this success and by focusing on our nations and regions we can work together with businesses to reap the benefits of entering new markets.

“There must be a sustained focus on levelling up the UK’s services exports, especially those in the underrepresented regions outside of London and the South East. International trade is a fundamental force for good and research shows that businesses that export are more productive, more innovative and see more growth.”

Negatives

S&P’s report, however, did highlight several points of concern across the industry.

While noting that the sector did end the year “on a high”, Tim Moore, economics director at S&P Global, said that “many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.”

There were also continued pressures on margins, as households and businesses try to manage the continuing effects of inflation on their budgets.