The UK services sector grew at its slowest pace in January since the aftermath of the EU referendum as the economy got off to a sluggish start in 2018.
The latest health check of a sector that includes hotels, restaurants, transport and the City from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) found that a loss of clients and lingering Brexit uncertainty had led to a dip in activity.
The monthly purchasing managers’ index from IHS Markit/CIPS fell from 54.2 points in December to 53.0 in January, its weakest since September 2016 and only slightly above the 50.0 cut-off point between expansion and recession.
Services account for almost four-fifths of the UK’s gross domestic product, but similar surveys for manufacturing and construction released last week also showed signs of slower UK growth at a time when other major economies – the US, the eurozone and Japan – have been expanding strongly.
Chris Williamson, the chief business economist at IHS Markit, which compiles the survey, said the three PMI surveys were consistent with the economy growing at 0.3% in the first three months of 2018 – down from 0.5% in the final quarter of 2017.
“The pace of UK economic growth slowed sharply at the start of the year as January saw a triple whammy of weaker PMI surveys,” he said.
“Service sector expansion slid to a 16-month low, reflecting a marked waning in growth of demand for business and consumer-facing services such as hotels and restaurants. Demand for transport and communication services was down for the second straight month.”
Despite weaker expansion than seen in 2017, the services PMI showed that companies continued to hire staff amid positive expectations about the outlook for their businesses. The survey also reported an easing of the inflationary pressures that emerged as a result of the fall in the pound after the EU referendum.
City analysts said the slowdown in the PMIs in January had put paid to any possibility that the Bank of England might raise interest rates at the meeting of its monetary policy committee this week.