Jobs across the services sector declined in December despite some signals of a “rebound” across the UK economy in new survey data.
Analysts at S&P Global said staffing numbers across UK firms continued to drop as the year drew to a close due to “intense cost pressures”.
The services sector suffered the most significant drop among the sectors tracked in S&P Global’s flash estimate.
The composite purchasing managers’ index (PMI) rose slightly to 52.1, which still represented “sluggish growth” in the UK economy, although higher than the 50 mark, indicating a majority of businesses reporting expanding activity.
Researchers also said the rise in new business orders was the strongest for 14 months, reflecting a rise in confidence labels and a boost to sales pipelines.
Client confidence also grew, according to survey respondents, though costs had accelerated again amid high wage growth, technology costs and energy bills.
The services sector index hit 52.1, compared to 51.3 in November, while manufacturing reached a 15-month high of 51.2.
“Job losses are also again worryingly widespread, and it remains to be seen whether the uptick in orders during December will persuade more companies to start hiring again, especially as rising staff costs continue to be reported as one of the key concerns of businesses,” Chris Williamson, chief business economist at S&P Global said.
“These higher cost pressures were in turn cited as the key cause of a renewed upturn in selling price inflation across both goods and services.
“The sluggish growth and worrying jobs data from the flash PMI data therefore suggest that the odds remain in favour of a further cut to interest rates at the December Monetary Policy Committee meeting, but that the path to further rate cuts in 2026 remains very data dependent, as policymakers await confirmation that price pressures are going to soften materially as the year proceeds.”
Services sector to hold steady as year ends
Jake Finney, senior economist at PwC, said the PMI suggested the weakening of the jobs market meant it was “unclear” whether hiring levels would pick up in the new year.
However, Finney suggested there was some hope that the UK economy would avoid posting a decline in the last quarter of the year.
“The latest PMI shows a strong rebound in business activity as the fog from the Budget clears. It reinforces our view that the weakness in recent GDP and PMI readings was driven more by elevated Budget-related uncertainty than by a structural collapse in underlying activity,” Finney said.
“Although the Chancellor set out a tighter fiscal stance, firms seem reassured that the drag on demand will be less severe than feared, helped by most of the tightening being pushed down the line.