UK Service Sector Growth Remains Subdued in December Amidst Falling Employment

Marginal Expansion in Business Activity

The United Kingdom's service sector concluded 2025 with what analysts describe as 'lacklustre' business activity growth in December. The headline seasonally adjusted S&P Global UK Services PMI Business Activity Index recorded 51.4, a fractional increase from 51.3 in November. This figure, while indicating an eighth consecutive month of expansion, was notably weaker than the earlier 'flash' estimate of 52.1 and remained significantly below the long-run trend of 54.2.

Tim Moore, Economics Director at S&P Global Market Intelligence, commented, 'Lacklustre business activity growth continued across the UK service sector at the end of 2025.' He added that 'the speed of expansion was softer than signalled by the earlier 'flash' survey in December and lower than seen on average in the second half of the year.'

Persistent Decline in Employment

Despite the marginal growth in business activity, employment figures within the service sector continued their downward trend. Staffing numbers fell for the 15th consecutive month in December. Approximately 21% of the surveyed companies reported a decrease in employment, while only 12% indicated a rise. This sustained decline was attributed to cautious hiring policies, with businesses citing 'elevated pay pressures and squeezed margins' as key reasons for not replacing departing employees. Job reductions were particularly evident across the service sector.

Rebound in New Work and Client Confidence

A more positive development was a 'renewed upturn in new business intakes' during December, following a slight contraction in November. The rate of new business expansion, though modest, was 'much faster than the average seen in 2025 as a whole'. This improvement was linked to 'tentative signs of a recovery in client confidence' after a period of pre-Budget uncertainty, alongside a 'marginal rebound in export sales'. New business from abroad saw a moderate increase, ending a three-month period of decline.

Inflationary Pressures Remain

The report also highlighted ongoing inflationary pressures. Input price inflation accelerated for the second consecutive month, reaching its highest level since May. This was driven by factors such as strong wage inflation, higher fuel bills, and rising technology costs. Consequently, output charges also increased markedly.