UK private economy weakens as service sector slumps on conflict woe

(Alliance News) - The UK private sector slipped into contraction in May, with activity in services declining, a survey showed on Thursday.

The S&P Global flash composite purchasing managers' index fell to 48.5 points in May, a 13-month low, from 52.6 in April.

Falling below the 50 point neutral mark, the number suggests the UK private sector has entered decline.

S&P Global said: "This was driven by a renewed fall in service sector output, which contrasted with a stronger upturn in manufacturing production. Survey respondents widely commented on subdued sales pipelines and fragile confidence among clients in the wake of the Middle East war. Input cost inflation remained steep in May, largely due to fuel surcharges and intense raw material price pressures. That said, the overall rate of input cost inflation moderated slightly from April's 41-month high."

The composite PMI is calculated using a weighted average of the manufacturing and service sector readings.

The flash services PMI fell to 47.9 points in May, a 64-month low, from April's final tally of 52.7.

"Service providers signalled the sharpest decline in business activity since January 2021," S&P Global said. "Anecdotal evidence cited greater economic hesitancy and weaker investment sentiment among clients, alongside delayed consumer spending decisions in response to the Middle East war (especially for international travel). A number of firms also cited domestic political uncertainty as a factor weighing on confidence among clients."

S&P Global said that excluding the pandemic period, it was the lowest services reading since July 2016.

S&P Global added: "Meanwhile, manufacturers noted a temporary uptick in demand amid customer front-loading to beat price hikes and potential supply disruptions. This contributed to a sustained expansion of production volumes in May, with the rate of growth accelerating to a three-month high."

The manufacturing PMI was steady at 53.7 points. The output index rose to 52.4 from 51.8.

"Meanwhile, the latest survey indicated a fall in business activity expectations across the UK private sector for the third time in the past four months. The degree of business optimism regarding the year ahead outlook was the lowest since April 2025. Weaker growth expectations in the service sector more than offset a slight improvement among manufacturing companies. Anecdotal evidence suggested that planned investment spending and ongoing AI innovation had supported business confidence, alongside expected improvements in export sales. Many firms nonetheless commented on growth headwinds due to rising inflation, elevated geopolitical uncertainty and squeezed discretionary consumer spending," S&P Global said.

By Eric Cunha, Alliance News news editor

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