UK Service Sector Contracts More Than Estimated In December

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The UK service sector contracted more than initially estimated at the end of 2020 with the downturn overwhelmingly linked to business disruptions, restrictions on trade and temporary closures due to the Covid-19 pandemic, final survey data from IHS Markit showed Wednesday.

The final IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers’ Index rose to 49.4 in December from 47.6 in November.

A score below 50 indicates contraction in the sector. The reading was also below the flash 49.9.

The survey revealed a fall in total new business across the service sector for the third consecutive month. Export sales remained a weak spot, with new business from abroad decreasing sharply in December amid heightened Brexit uncertainty.

Staffing numbers moved closer to stabilization in December, with the rate of job shedding the slowest since the downturn began in March 2020.

Input price inflation accelerated sharply since November and reached a ten-month high. Nonetheless, prices charged by service sector companies decreased for the fourth month running in December.

Expectations for business activity growth rose to the highest since March 2015.

With a third national lockdown underway, service providers will be braced for a sustained period of subdued UK economic conditions and deferred client spending in the first quarter of this year, Tim Moore, economics director at IHS Markit, said.

At 50.4 in December, the composite output index edged up from 49.0 in November and registered slightly above the 50.0 no-change threshold. The flash reading was 50.7.


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