Growth in the UK’s dominant services sector slowed to its lowest rate in more than a year in November as firms digested business tax rises in the autumn budget.
The closely watched S&P Global UK services PMI survey scored 50.8 in November, slowing from 52.0 in October.
It was slightly above the 50.0 reading forecast by a consensus of economists. Any reading above 50 means a sector is in growth, while a score below this means it is shrinking.
Rachel Reeves unveiled a £40bn package of tax rises in her October budget, including by increasing employer national insurance contributions. Employers will also face a 6.7% increase in the minimum wage from April.
Companies reported a sharp drop in business optimism, which S&P said reflected companies’ worries after the budget.
Tim Moore, the economics director at S&P Global Market Intelligence, said: “UK service providers indicated that business activity was close to stalling in November, with growth easing to its slowest for over a year.
“Weaker sales pipelines, cutbacks to new projects and more caution among clients were all cited as having an adverse impact on service sector output.
He added: “Worries about the impact of policies announced in the autumn budget, in particular those pushing up employment costs, were widely reported as leading to a gloomier assessment of business investment prospects and the broader UK economic outlook.”
The Bank of England, which is expected to keep interest rates on hold at 4.75% later this month, is keeping a close eye on services price growth. The BoE governor, Andrew Bailey, and other rate-setters have said the central bank would take a gradual approach in reducing borrowing costs.
Services firms reported the weakest growth in new orders since June, S&P said, while output growth expectations were the lowest since December 2022.
The composite PMI – which combines the services data with last week’s downwardly revised manufacturing survey – fell to an 12-month low, slipping to 50.5 from October’s 51.8. The composite PMI was revised up from a flash reading of 49.9.
