UK Services Growth Slows as Fuel Prices Drive Inflation

The UK services industry experienced a growth slowdown in September, with the S&P Global UK services PMI index dropping to 52.1 from 52.5 in August. Despite the cooling growth, S&P Global Market Intelligence reported that firms raised customer prices at the fastest rate since May to protect margins against surging input costs.

These cost increases were driven by record-high fuel prices, including diesel reaching £2 per litre, and increased staff pay. Analysts linked these pressures to the Middle East conflict and the Iran war. Additionally, the sector has seen two years of continuous job cuts, which some attribute to the adoption of artificial intelligence.

Economists warn that these price pressures could push inflation above 4% early next year. Such a trend may force the Bank of England Monetary Policy Committee to implement interest rate hikes later this year to combat second-round inflation effects.