Business surveys show confidence falls ahead of April tax rises and over half of firms intend to raise prices

Britain’s dominant services sector barely expanded last month, according to a closely-watched survey, recording the lowest business activity since October 2023, and firms laid off staff at the fastest rate since January 2021, when a Covid lockdown was in force.

The final reading for the services PMI for December, from S&P Global, shows that the main business activity index fell to 50.4 in December from 50.5 in November, the lowest since October 2023 and barely above the 50 mark that separates expansion from contraction. It’s below the ‘flash’ reading of 51.4.

The service sector ended last year with only a marginal upturn in business activity and a near-stalling of incoming new work. Survey respondents suggested that falling business and consumer confidence, largely due to worries about domestic economic prospects in 2025, had led to a considerable loss of growth momentum. While most parts of the UK service economy noted weak demand and cutbacks to client budgets, there remained pockets of strong growth in areas such as technology services.

A post-Budget slump in business optimism persisted in December, with output growth expectations for the year ahead unchanged from November’s 23-month low. Concerns about the impact of rising payroll costs, alongside a general unease about the climate for business investment, were reported as the main factors weighing on prospects for growth in 2025.