Growth ebbs in services sector amid Brexit clouds

● Costs and prices accelerate sharply in the industry ● Firms remain optimistic but less than in first half

The UK’S key services industry saw business activity ease last month from October’s sixmonth high while job creation remained muted, a new survey out yesterday showed.

However, prices charged by services providers – a sector that includes, pubs, restaurants, transport, IT and professional services – rose at their fastest since February 2008.

The IHS Markit/cips UK services purchasing managers’ index (PMI) recorded 53.8 in November, down from 55.6 in October. Any figure above 50 denotes growth, and the sector has been positive for 16 successive months.

Yesterday’s report said last month “pointed to a setback for the UK service sector” after October’s peak. “Volumes of new work also increased at a slower pace, while the rate of staff hiring was the jointslowest since March,” the report said.

Service providers’ optimism regarding the year ahead outlook picked up slightly last month, but remained weaker than the trend in the first half of 2017.

“Service sector companies commented on rising business and consumer spending during November, but some noted that stretched budgets and Brexit-related uncertainty had continued to act as a brake on growth,” the survey said.

It added that last month saw “sharp and accelerated rises” of both costs borne by the services industry and prices charged to customers.

“The current phase of input price inflation remains the strongest since the first half of 2011, with survey respondents linking higher operating expenses to increased costs for energy, food, fuel, imported items and staff salaries,” the survey said.

Chris Williamson, chief business economist at IHS Markit, said: “Slower service sector growth comes as a disappointment after the improved performances of both manufacturing and construction in November. However, despite the weaker service sector expansion, the latest survey data indicate that the economy is on course to enjoy robust growth in the fourth quarter.

“The survey data are so far consistent with the economy growing at a quarterly rate of 0.45 per cent in the closing months of 2017.”

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, commented: “November’s data painted a disappointing portrait of a sector struggling against Brexit-related uncertainty and a weaker economic outlook.” Iomart, the Glasgow-based cloud computing and internet hosting business, has pointed to “significant” market opportunities after posting solid half-year numbers and declaring a maiden interim dividend of 2.25p per share. Revenues were up 12 per cent to £47 million, while adjusted Ebitda lifted 9 per cent to £19.2m. Chief executive Angus Macsween said: “The market opportunity remains significant and we continue to invest in our skills, infrastructure and capabilities.”