The UK service sector has seen its fastest growth since January, despite continued anxiety over Brexit uncertainties.
Despite an initial slowdown, British hotels and banks look to cap off the year with solid performances suggesting a resilient UK economy.
According to the Markit/CIPS, UK services PMI rose to 55.2 in November up from 54.5 the previous month. This proved a better-than-expected performance, with Reuters forecasts anticipating the sector to experience slowdown to 54.0. The index has now been above the 50-mark which indicates growth, as opposed to contraction for four consecutive months.
Chris Williamson, the chief economist for business at IHS Markit, stated:
“The further upturn in the vast services sector shows that the pace of UK economic growth remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit.
“The three PMI surveys collectively indicate that the economy will grow by 0.5% in the fourth quarter.”
The sector has benefited from a weaker pound, pushing up overseas demand and led to growth in employment levels. Nevertheless, sterling weakness also meant higher import costs and greater pressure as a result of higher food and fuel costs for British businesses within the services sector.
In addition, it was noted that the pressure from inflation and as political uncertainty starts to weigh upon business outlook, this may impact performance into the new year. Similar concerned were raised last week in respect to the UK’s manufacturing and construction industry.
“Rising prices – often linked to the weaker pound – are a big concern, however, and suggest that inflation is set to lift higher,” Williamson continued.
“The past two months have seen the steepest rise in businesses’ costs for over five-and-a-half years. These higher costs will inevitably feed through to consumers in the form of higher prices.”
The services sector remains a dominant contributor to the UK economy, making up over 75 percent.