Growth in the UK services sector picked up last month, but economists have warned that the recovery is likely to prove short-lived as businesses face rising costs, weak demand and renewed disruption linked to the war in the Middle East.
The latest S&P Global UK Services PMI rose to 52.7 in April, up from 50.5 in March, signalling a modest expansion in activity across a sector that includes hospitality, transport, healthcare and leisure.
Any reading above 50 indicates growth, meaning the sector has now remained in expansion territory for nearly a year. However, the latest figures point to a slower pace of growth than earlier in 2026.
Analysts said the improvement may reflect a temporary boost in activity rather than a sustained recovery, with firms reporting subdued new business and weakening demand conditions.
Tim Moore, economics director at S&P Global Market Intelligence, said the rebound could “easily prove short-lived”, noting that new orders remained weak compared with earlier in the year.
Survey respondents pointed to a combination of intensifying inflationary pressures, global supply chain disruption and elevated borrowing costs as key constraints on demand.
Some firms also reported weaker export sales, citing reduced business travel and softer demand in parts of the Middle East. Others, however, noted continued strength in global demand for technology services.
Despite the uptick in activity, inflationary pressures accelerated sharply across the sector.
Input costs rose at the fastest pace since November 2022, with companies citing higher fuel prices and rising costs of raw materials such as metals and plastics, driven in part by energy costs linked to geopolitical tensions.
Firms also reported growing wage pressures following the increase in the national minimum wage at the start of April.
Businesses widely linked weaker confidence to the escalation of conflict in the Middle East and its impact on global supply chains.
Mr Moore said respondents had highlighted “the Middle East conflict and subsequent global supply chain disruptions” as key factors weighing on both business and consumer sentiment.
Matt Swannell, chief economist at the Item Club, said there were already signs the rebound would fade, with little improvement in new work and ongoing weakness in domestic and foreign demand.
“We think that the outlook for private sector activity is gloomier,” he said. “A sharp rise in inflation will cause households’ real incomes to fall and spending growth to slow.”
He added that rising costs, supply chain disruption and geopolitical uncertainty were likely to prompt firms to delay investment plans.
The survey also has implications for monetary policy, with economists suggesting the Bank of England is likely to keep interest rates on hold for the rest of the year, although a further hike this summer has not been ruled out.
Thomas Pugh, chief economist at RSM UK, said firms had shown resilience but warned that some of the recent improvement was driven by a short-term rush in activity ahead of expected price rises and supply constraints.
“Everything depends on how energy prices move going forward,” he said.
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