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UK services sector stabilises in December amid general election

Edmund Heaphy
·Finance and news reporter
City of London
City of London. Photo: Yara Nardi/Reuters

The UK’s services sector stabilised in December, with new orders rising at their fastest pace since July 2019, according to data released on Monday.

Data provider IHS Markit’s closely watched services sector PMI came in at 50.0 in the final month of 2019, up from 49.3 in November and coming in ahead of analyst expectations.

This means that business activity in the services sector, which has been dented by Brexit uncertainty, was unchanged in December.

The sector was boosted by the sharpest rise in new work since July, partly driven by a rebound in business optimism, which reached its highest level in 15 months.

This sector is hugely important to the UK economy — it includes finance, law, engineering and consulting — and makes up about 45% of the country’s exports.

Tim Moore, associate director of economics at IHS Markit, pointed to the fact that the data published on Monday includes survey responses from after the election.

Initial data had indicated that companies were delaying spending decisions in the run-up to the December general election.

But the new figures “strike a slightly more positive tone”, Moore said, suggesting that the sector was boosted by prime minister Boris Johnson’s emphatic general election win.

IHS Markit said that there were signs that service providers had become hopeful that a more stable political backdrop will support business conditions over the course of 2020.

A number of survey respondents predicted a short-term boost to business activity once the first stage of Brexit is resolved at the end of January.

This increase in optimism and climbing workloads boosted staffing levels across the sector, even as some data suggested that companies had not been replacing workers who had voluntarily departed their jobs.

“The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape,” said Moore.

Prices charged by service sector firms increased only slightly in December, however, with the rate of inflation the weakest since February 2016.

Ducan Brock, the group director of the Chartered Institute of Procurement and Supply struck a more muted tone, however, noting that the sector was “only just” elevated out of its doldrums.

“Any improvement in the sector’s fortune is of course welcome, but this small improvement to the no change mark means stagnation is also a possibility,” he said.