UK growth at risk as services output falls to 16-month low

‘Triple whammy’ of weaker PMI surveys for the start of the year

Activity in Britain’s services sector slipped to a 16-month low in January, resulting in a “triple whammy” of weak data that stands to knock UK growth.

The IHS Markit/CIPS UK Services purchasing managers’ index (PMI) showed a reading of 53 in January, down from 54.2 in December. A reading above 50 indicates growth.

Businesses were hit by weak gains in new work, the loss of existing clients and “lingering concerns surrounding the UK’s exit from the EU”.

It resulted in services sector output rising at its slowest pace since September 2016 and adds to disappointment over PMI surveys covering manufacturing and construction sector performance in January.

“The pace of UK economic growth slowed sharply at the start of the year as January saw a triple whammy of weaker PMI surveys,” said Chris Williamson, chief business economist at IHS Markit.

“The softer service sector growth follows news of the manufacturing upturn losing momentum at the start of the year and a near-stagnant construction sector.”

Mr Williamson added that the January numbers were signalling a UK growth rate of “just under 0.3%” for the first quarter of 2018, which would mark a slowdown from 0.5% in the final month of 2017.

He said the hit to the services sector expansion reflected “waning” growth in demand for businesses and consumerfacing services like hotels and restaurants, while transport and communications also suffered a drop in market appetite for the second month running.