UK Services PMI falls to lowest point in over three years

The UK Services Purchasing Managers Index (PMI) fell to 48.7 in June, reaching a new 41-month low.

Business conditions continue to be defined by weaker demand, rising costs, and growing uncertainty across the wider economy, and any confidence remains fragile, once again being undermined by instability at the top of government.

A PMI reading above 50 indicates growth in business activity, while anything below that level points to contraction. Because the services sector accounts for roughly 80% of the UK economy, the survey is widely regarded as one of the earliest and most reliable indicators of changing economic conditions.

Since the spring, businesses have been hit by weaker customer demand as households and firms have become more cautious about spending. Concerns over the Middle East conflict, rising fuel prices, and the wider cost of living have created added pressure.

Few businesses will feel entirely comfortable about the outlook for the rest of the year. Salary bills and other labour-related costs remain high, borrowing costs are still a cause for concern, and many consumers continue to keep a close watch on their spending decisions amid the ongoing cost-of-living crisis. With Keir Starmer’s premiership coming to an end, it remains to be seen how supportive of business the new Prime Minister and their economic team will be.

A flourishing services sector will be at the heart of any recovery in the wider economy. A rebound in confidence in July will be important, but this must be sustainable rather than short-lived. If inflationary and geopolitical pressures can begin to ease over the summer, and if the incoming Prime Minister can set out a clear, pro-business policy direction, a more stable and supportive operating environment could emerge — but the outlook currently remains bleak.