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UK Service Sector Growth Remains Strong

Service Sector Growth Continues To Be Healthy


Steven Beahan, Partner | +44 (0)114 294 7868

September brought good news for SMEs in the UK service sector as growth continued, a new survey has revealed.

The Purchasing Managers Index, published jointly by Markit and the Chartered Institute of Purchasing and Supply (CIPS), delivered a reading of 58.7 for September. Although this was down from August's 60.5, it still stands well above the 50 reading that marks the boundary between growth and contraction.

While the reading was the least strong in three months, it was still higher than the long-term survey average and suggested that, while the UK economy may be slowing a little as expected, this year will turn out to have been one of substantial economic growth.

All that should be highly beneficial to SMEs in the service sector. The rise in business has been reflected in employment levels, with this increasing for the 21st month in a row. A notable feature among those who added to payrolls was that they were doing so not just in response to current demand, but also in anticipation of further expansion.

Confidence levels were at a three-month high across the sector, with firms being optimistic about the economy and companies involved in Scotland being more certain about the future after the outcome of the independence referendum.

Group chief executive at CIPS David Noble commented: "Whilst not quite hitting the heights of August’s exceptionally high growth rate, services businesses still expanded rapidly in September.

"There are positive signs all around with jumps in confidence levels and new business volumes suggesting the future continues to look rosy for the sector."

However, Markit economist Chris Williamson sounded a note of warning, pointing to the moderation in growth and warning that this process could happen "faster than anticipated" if the substantial slowdown in manufacturing output has a "knock-on" effect on services.

The manufacturing PMI dipped from 52.2 in August to 51.6 last month, but there was better news in the construction sector, where the PMI rose from 64 to 64.2.

Expert Opinion
If these figures are to be believed, September has been another positive one for the huge number of small businesses in the service sector despite the figure marking a fall from previous months.

"Confidence is very high at present and this has also led to employment levels rising, so ultimately many organisations will be feeling the benefit from the positivity which has arisen.

"However, we would always urge SMEs to be wary of the obstacles and growing pains which can develop when growing a business. The key to avoiding such headaches is always to seek third party advice from experts including lawyers, who can provide tailored guidance on a range of key issues from employment law to regulatory advice."
Steven Beahan, Partner

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