The UK’s services sector suffered one of its steepest falls in business activity for more than a decade in May, raising fresh concerns about the strength of the economy.
According to the latest S&P Global Purchasing Managers’ Index (PMI), businesses are facing growing pressure from political uncertainty surrounding Prime Minister Keir Starmer’s leadership, as well as disruption linked to tensions in the Middle East. Firms reported rising costs, supply chain challenges and continued job losses.
The services PMI, which measures activity across industries including hospitality, retail, finance and IT, recorded its weakest result since January 2021. Excluding the pandemic period, it marked the lowest reading since July 2016.
The sector accounts for around 80% of the UK economy, making it a major driver of economic growth. The wider PMI composite output index, which tracks both services and manufacturing, dropped sharply to 48.5 in May from 52.6 in April. Any reading below 50 signals contraction in business activity.
The figure was significantly lower than economists had expected and represented the weakest performance since April 2025. Private-sector payroll numbers also fell for the twentieth consecutive month, driven largely by faster job cuts in service businesses.
Separate figures from the Office for National Statistics showed UK payroll employment fell by 100,000 in April, following a 28,000 drop in March.
Manufacturing provided a small positive sign, with activity reaching a three-month high as firms accelerated orders ahead of possible price rises and supply disruption.
Economists believe weaker growth and easing inflation could reduce pressure on the Bank of England to increase interest rates next month.
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