UK services PMI fell to 48.8 in June, the lowest since January 2023. Demand weakened for a fourth month. Input cost inflation eased. The data supports BoE rate cut expectations.
The UK services sector contracted at its sharpest pace in nearly three and a half years in June. The S&P Global Services PMI Business Activity Index fell to 48.8 from 49.3, its lowest reading since January 2023. The Composite PMI Output Index slipped to 49.3 from 49.7, marking a second consecutive month below the 50.0 growth threshold and its weakest print since April 2025.
New orders declined for a fourth straight month. S&P Global described the drop as the steepest in just over three and a half years. Economics Director Tim Moore said firms cited persistent cost pressures and subdued customer demand as the main factors weighing on activity. Uncertainty surrounding the Middle East conflict also played a role. Businesses reported fragile investment sentiment and greater client caution. Pressure on household spending contributed to softer service-sector output.
Input cost inflation eased to its lowest level since March. Lower fuel prices, following the decline in global oil prices, helped. Businesses continued to report higher transport and wage costs. Raw material costs also rose. The moderation in overall cost pressures provided some relief.
Business confidence improved modestly on hopes that the US-Iran ceasefire would prove durable. Optimism remained well below levels seen at the start of the year. Concerns over the broader UK economic outlook persisted.
The services sector accounts for roughly 80% of UK GDP. Two months of composite readings below 50 suggest the broader economy may be struggling to maintain the modest growth seen earlier in 2025.
For sterling, the PMI numbers add to the case for a cautious Bank of England. Weaker services activity and easing cost pressures give the MPC more room to consider rate cuts later this year. Wage growth and sticky services inflation remain concerns. GBP/USD held near $1.27 after the release. It was little changed on the session. Traders weighed the soft survey against broader dollar weakness from the previous week.
The next major UK data point is the labour market report due July 15. It will show whether the softening in activity is feeding through to hiring and pay settlements.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.