Services sector suffers worst month since Covid forced most of the country into lockdown 17 months ago as cost of living crisis rages
- Survey estimates industry growth lowest since February 2021
- It comes amid “increased economic uncertainty” due to inflationary pressure
- Report finds operating expenses and average prices are growing at high rates
- Businesses continue to worry about the risk of recession for the UK and global economy
The services sector has had its worst month since Covid forced parts of the country into lockdown 17 months ago – as inflation and the cost of living crisis continue to batter customers.
A new survey estimated that growth in the sector is at its lowest since February 2021 amid “a climate of heightened economic uncertainty”.
The report also found that operating expenses and average billed prices continue to rise at high rates, despite the fact that inflation has “significantly come down” since June.
And despite optimism that business investment and the release of new products will help growth in the months ahead, companies continue to worry about the impact of “high inflation, rising interest rates interest and recession risks for the UK and the global economy”.
The monthly S&P Global/CIPS UK services PMI survey came in at 52.6 in July, down from 54.3 the previous month.
Although it still saw growth in the sector – anything above 50 is positive – analysts believe it to be higher.
They had predicted that growth would reach 53.3, according to a consensus provided by Pantheon Macroeconomics.
Tim Moore, chief economics officer at S&P Global Market Intelligence, said: “UK service providers reported their worst month for expanding business activity since the nationwide lockdown in February 2021.”
Rising inflation and pressure from the cost of living have increased economic uncertainty for the sector, according to the report, and it has therefore struggled to attract new business.
Meanwhile, businesses have continued to face higher costs and have to charge their customers more.
Rising fuel and utility bills have pushed up costs for businesses both directly and indirectly, despite inflation falling from recent highs in May and June.
Mr Moore added: “The most encouraging development in July was a considerable slowdown in input cost inflation from the previous month, likely reflecting lower commodity prices and a gradual easing of supply shortages. global supplies.
“The overall cost burden increased to the smallest extent seen so far in 2022, despite numerous reports of pressure on operating expenses from rising fuel bills and staff salaries. .”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “A period of relative stability in terms of supply chain disruption was also a plus, according to survey respondents.
“However, after the scramble to regain the highs in activity during the Covid rebound lost momentum, the UK market will need to improve much further to avoid a prolonged summer of discontent.”