The UK services sector shrinks at its fastest pace since 2023

The UK services sector contracted in April at its fastest pace in two years, marking the first decline since October 2023. The sector accounts for the majority of the country's economy.

The UK Services PMI fell from 52.5 in March to 49.0 in April. The Composite PMI, which combines services and manufacturing survey data, declined from 51.5 to 48.5 over the same period.

As S&P Global states, accelerating labor market inflation reflects both the near 7% minimum wage hike and additional payroll taxes introduced by UK Chancellor Rachel Reeves. Meanwhile, employment levels have now declined for seven consecutive months.

According to the S&P Global survey, UK manufacturing export orders dropped at their fastest pace since May 2020.

The Bank of England is expected to cut its rate by 25 basis points from 4.5% to 4.25% on Thursday, May 8.

In April, the International Monetary Fund (IMF) downgraded its 2025 UK growth forecast from 1.6% to 1.1%. However, the IMF noted that Britain’s economy will still outpace most European peers.