Britain’s services sector started 2023 with its worst result in two years, hurt by cuts in business and consumer spending, a survey showed on Friday, in line with recession warnings from the Bank of England.
However, there are signs of improvement in some companies.
The final reading of the S&P/CIPS UK services purchasing managers’ index (PMI) fell to 48.7 points in January, down from 49.9 in December.
This is its lowest level since January 2021, when the country was under harsh restrictions imposed due to COVID-19.
However, the reading was less weak than the preliminary estimate for January of 48.0 points.
“The latest survey illustrates that the U.K. economy is at risk of falling into recession as labor shortages, labor disputes and higher interest rates take their toll,” said Tim Moore, chief economics officer at S&P Global Market Intelligence.
However, the slowdown was relatively shallow and new order volumes approached stabilisation, while export sales grew, helping to boost employment.
The headline cost inflation rate fell to its lowest level since August 2021 as lower fuel prices provided some relief, and business activity expectations for next year were the strongest since April 2022.
The composite PMI, which combines the services survey with Tuesday’s manufacturing PMI, fell to 48.5 in January from 49.0 in December.
The Bank of England warned on Thursday of a recession that would last five quarters from early 2023, although its forecast for the slowdown was less severe than its November projection.
Britain’s central bank also softened its guidance on the need for future interest rate hikes, saying it would respond to more persistent than expected inflationary pressures, especially among service companies.
