UK services firms face rising costs, hike prices

• UK services firms reported stronger cost pressures in September.
• Surging fuel prices due to the Middle East conflict drove up input cost inflation.
• Prices charged by service sector companies saw their sharpest increase since May.
• Employment in the services sector fell for the 24th consecutive month.
• Business sentiment edged down due to weak demand and cost pressures.

British services firms experienced heightened cost pressures in September, with fuel prices significantly impacted by the Middle East conflict. This led to the highest increase in prices charged by these companies since May, signaling a reversal of the slowdown seen mid-year, according to a survey by S&P Global.

The headline gauge for the UK services sector Purchasing Managers' Index (PMI) registered 52.1 in September, a slight decrease from 52.5 in August, marking its weakest growth since June. Input cost inflation for these firms rose to its highest point since June, driven by both wages and elevated fuel costs. Over a third of surveyed companies reported an increase in their average cost burdens.

The measure of prices charged by companies reached its highest level since May, potentially increasing concerns at the Bank of England regarding a resurgence in inflation. Concurrently, employment within the services sector declined for the 24th consecutive month, the longest period of decrease on record since 1997. Business sentiment for the upcoming year saw a slight dip from August's seven-month high, attributed to weak demand and persistent cost pressures.

The composite PMI, which incorporates the manufacturing industry, also eased to 52.0 from 52.5, its lowest point since June, though it remains in growth territory above the 50.0 threshold.