FX.co ★ UK Services Sector Remains Stuck in Contraction

The S&P Global UK Services PMI for May 2026 was revised up to 49.3 from a flash estimate of 47.9, but remained below April’s reading of 52.7. This pointed to the first contraction in the sector since April of the previous year, amid persistently weak domestic and external demand. New business fell for a third consecutive month, albeit only slightly. Firms in hospitality and transport cited reduced discretionary spending and higher input costs, while professional services reported softer demand as clients became more risk-averse. In response, service providers implemented significant payroll cuts, with job shedding accelerating to its fastest pace since February. Input cost inflation stayed elevated, easing only marginally from April’s 41-month high, driven by rising energy, fuel and transport costs, along with higher wages and technology expenses. Output prices also continued to rise strongly, though the rate of increase slowed from April’s 39-month peak as firms continued to pass on higher costs. Business expectations for the year ahead weakened to their lowest level since April 2025.