UK services PMI hits 8‑month high, hiring resumes

UK services activity strengthened in October 2026, with the S&P Global UK Services PMI Business Activity Index rising to 52.8 from 52.1 in September, marking its highest level since February. Readings above 50 signal expansion, and October represented the fourth consecutive month of growth in the sector. The improvement contributed to an increase in the UK Composite PMI Output Index to 52.9 from 52.0, also an eight‑month high, indicating firmer growth across both services and manufacturing.

Improving customer demand and larger order books supported the faster expansion in services.

New business in the services economy increased for the fourth consecutive month and at the fastest pace since January. Growth was driven mainly by domestic demand, as services export orders continued to decline slightly, although the fall in overseas sales was the smallest since March. Across the broader private sector, new business growth reached a nine‑month high, reflecting stronger pipelines in both services and manufacturing.

Companies cited improving economic conditions, reduced risk aversion among clients and business development opportunities as supporting factors. Several service providers highlighted increased sales connected to AI‑related investment spending. Manufacturing output also recorded its fastest expansion since September 2024, contributing to overall private‑sector output growth at an eight‑month high.

Service‑sector companies hired additional staff, ending a two‑year period of job cuts. Employment in services rose by 2 points, moving above the 50 threshold for growth for the first time since September 2024.

The increase in staffing levels was described as marginal. Many businesses maintained hiring freezes because of cost pressures, and some service providers reported that AI adoption allowed them not to replace voluntarily departing workers. Outstanding business in services continued to decline, suggesting that firms still had capacity to absorb demand without rapid workforce expansion.

Alongside stronger output and hiring, inflationary pressures intensified. Input costs in the services sector rose in October at the fastest rate since May, with average cost burdens at a five‑month high. Around 38% of firms reported higher input prices and 1% reported a decline, citing higher energy, fuel, transportation, wage and raw material costs.

Service providers passed on some of these higher costs through increased output charges, but the rate of output price inflation eased slightly compared with September amid competitive pressures. For the composite index, input cost inflation reached its highest level since June, underscoring that stronger growth was accompanied by renewed price strains across the private sector.

Forward‑looking indicators also strengthened. Business activity expectations for services rose to their highest level since February, reaching an eight‑month high.

Even with this improvement, confidence in the services sector remained below its long‑run survey average, indicating that firms were more upbeat than earlier in the year but still cautious by historical standards. Overall, the October PMI data signalled a combination of faster output growth, the first increase in employment in more than two years, and intensifying cost pressures in the UK private sector.