UK Services Sector Prices Surge Amid Fuel Costs and Slowing Growth

The UK’s services sector saw a slowdown in growth last month, but firms responded by raising prices at the fastest pace since May due to surging fuel and energy costs. The S&P Global UK services PMI index registered a reading of 52.1 in September, down slightly from 52.5 in August. Despite the decline, the score remained above 50.0, indicating continued expansion, and marked the third consecutive month of growth. However, businesses reported significant cost pressures from rising fuel prices and higher staff wages, leading to the steepest increase in customer prices since May.

The survey also highlighted ongoing job cuts in the services industry, although at the slowest rate in nearly a year. Some companies attributed this to advancements in technology, including artificial intelligence (AI), which reduced the need to replace departing workers. The services sector encompasses a wide range of subsectors, including hospitality, real estate, financial services, healthcare, and transport, making it the dominant industry in the UK.

Tim Moore, economics director for S&P Global Market Intelligence, noted that the Middle East conflict had driven up fuel prices, reversing the slowdown seen earlier in 2026. The average price of diesel reached an all-time high of £2 a litre last week, while petrol prices have also risen by around 42p a litre since the start of the Iran war. These increases have raised transportation and supply chain costs for businesses.

Thomas Pugh, chief economist for RSM UK, warned that the pressure on prices could push inflation above 4% early next year, potentially forcing the Bank of England to raise interest rates. He described the next six months as "more challenging," citing the risk of higher business operating costs and squeezed household incomes.