**UK Services Sector Returns to Growth as Business Confidence Rebounds**
The UK services sector has shown signs of recovery, returning to growth in July after a period of decline, according to a recent survey conducted by S&P Global. The S&P Global UK Services Purchasing Managers’ Index (PMI) rose to 52.1 in July, up from 48.8 in June, marking the first growth since April. This increase is significant as it surpasses the earlier provisional reading of 51.8 and indicates a positive shift in the sector's performance.
The services sector is a vital component of the UK economy, and its rebound is largely attributed to a rise in new orders. The index of total new work among services firms climbed to 50.8 in July, up from 47.6, marking the strongest performance since February. This shift ends a four-month streak of declining orders that began following the onset of the Iran war in February.
Additionally, the composite PMI, which includes data from the smaller manufacturing sector, also saw an increase, rising to 52.2 from 49.3. This marks the first time since April that the composite index has surpassed the critical 50 mark, which separates growth from contraction.
Despite the overall positive indicators, the survey highlighted some ongoing challenges within the sector. New export orders continued to decline for the fifth consecutive month, although the pace of this decline was noted to be the mildest during that period.
The survey also revealed that services firms experienced the weakest increase in input costs since February, a development attributed to a ceasefire in the Iran conflict that has contributed to lower oil and gas prices. Consequently, prices charged by services firms rose at the slowest rate in five months, suggesting a moderation in inflationary pressures.
Employment figures, however, remain concerning. The employment gauge dropped for the 22nd month in a row, equalling a streak seen during the global financial crisis nearly two decades ago. Nonetheless, the pace of decline in employment was noted to be the softest since October 2025, indicating a potential stabilization in the labor market.
Business confidence within the services sector has also seen a notable increase, reaching its highest level since February. Tim Moore, economics director at S&P Global Market Intelligence, commented on the situation, stating, “Stronger growth projections for the year ahead partly reflected hopes of de-escalating Middle East tensions and recent signs of easing inflationary pressures.”
The recovery of the services sector is a positive development for the UK economy, which has faced various challenges over the past months. As businesses adjust to changing conditions, the focus will likely shift to sustaining this growth momentum and addressing the ongoing issues related to employment and export orders. The outlook for the next 12 months appears cautiously optimistic, with expectations for increased activity and improved business conditions.