UK Services Sector Growth Slows Amid Fastest Price Hikes Since May

The UK's services sector saw growth slow in September, with firms raising prices at the fastest pace since May due to surging fuel and energy costs. The S&P Global UK services PMI index registered 52.1, down slightly from 52.5 in August but still above the 50.0 threshold indicating growth. The reading also exceeded an earlier estimate of 51.7, marking the third consecutive month of business activity expansion.

Companies reported that higher fuel prices and increased staff wages drove up overall business costs. In response, firms raised customer prices at the fastest rate since May to protect their margins. The survey also highlighted continuous job cuts across the services industry for the past two years, though at the slowest pace in nearly a year. Some companies attributed this to advancements in technology, including artificial intelligence (AI), reducing the need to replace departing workers.

Tim Moore, economics director for S&P Global Market Intelligence, noted that surging fuel prices due to the Middle East conflict continued to drive up input cost inflation. This led to the sharpest increase in prices charged by service sector companies since May, reversing the slowdown observed in mid-2026. The average price of diesel hit an all-time high of £2 a litre last week, while petrol prices have also risen significantly since the start of the Iran war.

Thomas Pugh, chief economist for RSM UK, warned that increased pressure on prices across the sector will concern the Monetary Policy Committee (MPC) and strengthen the case for interest rate hikes later this year. He predicted that rising energy prices could push inflation above 4% early next year, squeezing household incomes and potentially forcing the Bank of England to take action.