Survey Shows Services Sector Experiencing Slower Growth Due to Pre-Election Disruptions
The services industry has seen reduced output levels due to client hesitancy ahead of the general election.
A “pre-election seize up” has impacted growth in the UK services sector in June, with clients taking a “wait and see” approach, as per a survey.
In June, the index recorded a level of 51.2, indicating a general expansion in the services economy. However, this was lower than May’s figure of 52.9.
“We are observing a pre-general election seize-up in the UK services economy, with slower growth in business activity as some adopt a cautious approach, impacting sales,” said Joe Hayes, principal economist at S&P Global.
Some service companies have reported lower output levels due to client hesitation before the election.
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In June, businesses delayed new projects and experienced modest growth in new business, which was the lowest in seven months.
Backlogs of work decreased in the services sector for the thirteenth consecutive month, with the sharpest decline in incomplete orders since November 2023.
Growth and Optimism
Employment growth slowed down marginally in June, as companies remained cautious. Respondents remain positive, with almost half expecting growth in the next 12 months.
Despite concerns about the change in government and uncertainty, confidence among businesses fell to a seven-month low.
Costs and Price Changes
Although cost pressures remained high, input costs increased at a slower rate in June. Businesses raised their service charges slightly higher, indicating pricing power.
The Bank of England is expected to decrease interest rates in August, but will only do so if inflation remains stable. The economy has seen slow recovery since entering a technical recession last year, with companies potentially increasing prices.
There was a slight growth in sales to non-domestic customers, with businesses facing higher shipping and raw material costs.
Global disruptions have impacted the UK, including conflicts, the pandemic, and geopolitical tensions, affecting supply chains and market stability.
