• Final Services PMI 51.1 vs. 51.4 expected and 50.8 earlier.
• Final composite PMI 50.4 vs. 50.5 expected and 50.5 prior.

Key Findings:

• Employment fell for the third month in a row.
• Marginal increase in business activity.
• Input cost inflation accelerates to an eight-month high.

Comment:

Tim Moore, chief economist at S&P Global Market Intelligence, said:

“The service sector ended last year with only a slight increase in business activity and almost a standstill in the arrival of new business. Respondents indicated that a decline in business and consumer confidence, mainly due to concerns about the domestic economic outlook in 2025, led to a significant loss growth momentum While most service sectors in the UK have seen weak demand and shrinking client budgets, there have been pockets of strong growth in areas such as technology services.

After the budget drop, business optimism continued in December, and production growth expectations for the following year remained unchanged compared to November’s lowest level in 23 months. Concerns about the impact of rising wage costs, along with general uneasiness about the climate for business investment, are reported to be the main factors affecting growth prospects in 2025.

Rising input price inflation contributed to a bleak near-term outlook for service providers, with overall cost pressures hitting an eight-month high in December. Meanwhile, inflation-adjusted prices intensified at the end of last year and remained well above pre-pandemic trends.

Faced with subdued demand conditions and rising employment costs, many service providers decided to reduce staffing and delay filling positions in December. Almost one in four respondents saw an overall decline in the number of their payrolls. Excluding the pandemic, this represented the fastest pace of job cuts in more than 15 years.”