UK Services Sector Contracts First Time in 18 Months

The UK services sector contracted in April 2025 for the first time since October 2023, signaling the end of a prolonged period of growth and raising concerns about the broader economy. The S&P Global UK Services PMI fell to 49.0, with figures indicating particularly weak overseas demand, especially following recent US tariff announcements, which survey respondents said fueled global financial turbulence and order book uncertainty. New business from abroad dropped at the fastest rate since February 2021, while domestic demand remained subdued, leading to cautious hiring and accelerated job cuts. Rising input costs from increased payroll taxes and a higher minimum wage also pressured businesses, prompting many to raise prices at the fastest pace in nearly two years. The composite PMI's decline to 48.5 reflects mounting concerns about stagflation, with both inflationary pressures and weakening growth prospects. Analysts warn that continued trade tensions and elevated costs could prompt further economic policy shifts as the UK navigates a volatile market environment.