UK service sector picks up but inflationary pressures mount

(Sharecast News) - The UK service sector continued to grow in April, a closely-watched survey showed on Wednesday, despite the Middle East crisis causing a sharp spike in input price inflation.

The latest S&P Global UK services PMI business activity index came in at 52.7, up on March's 11-month low of 50.5 and ahead of consensus for 52.0.

The composite PMI - the weighted average of the manufacturing output and the services business activity indices - was also above consensus, rising to 52.6 from 50.3. Economists had been expecting a print closer to 52.0.

A reading above the neutral 50.0 indicates growth while one below it suggests contraction.

However, respondents to the services PMI flagged a number of headwinds arising from the conflict in the Middle East, with worries about global supply shortages, higher borrowing costs and rising inflationary pressures all weighing on business and consumer demand.

Input price inflation jumped at the strongest rate since November 2022, with 57% of the panel reporting an increase in their average cost burdens, up from 40% in March. Respondents pointed to higher fuel and raw material prices as well as elevated wage pressures.

Tim Moore, economics director at S&P Global Market Intelligence, said: "April data signalled a modest recovery in the UK service sector output after the considerable loss of momentum in March.

"However, this improvement could easily prove short-lived, as new business intakes remained subdued in comparison to the start of 2026.

"Business activity expectations for the year ahead edged up only slightly from March's nine-month low, largely reflecting concerns about the broader economic outlook and escalating inflationary pressures."

Data were collected between 9 and 28 April. Questionnaires were sent to a panel of around 650 service sector companies.