UK Services Sector Faces Price Surge Amid Fuel Costs

The UK’s services sector saw a slowdown in growth during September, though firms continued to raise prices at the fastest pace since May due to rising fuel and energy costs. The S&P Global UK services PMI index registered a reading of 52.1, slightly down from 52.5 in August but higher than an earlier estimate of 51.7. This marks the third consecutive month of business activity growth, with any reading above 50.0 indicating expansion.

Surging fuel prices, driven by the Middle East conflict, contributed to higher input cost inflation. Businesses reported increased transportation costs, higher oil and gas prices, and international shipping disruptions. In response, companies raised customer prices at the sharpest rate since May to protect their margins. This trend signals a reversal of the slowdown observed in mid-2026.

The survey also noted two years of continuous job cuts in the services industry, albeit at the slowest rate in nearly a year. Firms adopting new technologies, including artificial intelligence (AI), cited this as a reason for not replacing departing workers. The services sector spans various subsectors, including hospitality, real estate, financial services, healthcare, and transport, making it a dominant industry in the UK.

Experts warn that rising energy prices could push inflation above 4% early next year, squeezing household incomes and potentially prompting the Bank of England to raise interest rates later this year. Tim Moore, economics director for S&P Global Market Intelligence, noted the impact of surging fuel prices on input cost inflation. Thomas Pugh, chief economist for RSM UK, highlighted the pressure on prices, which may concern the Monetary Policy Committee and strengthen the case for rate hikes.