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UK service sector growth falls to lowest in 11 months as costs surge
By Michele Maatouk
Date: Tuesday 07 Apr 2026
(Sharecast News) - Activity in the UK services sector hit its lowest level in March in 11 months, while costs surged amid the war in the Middle East.
The S&P Global services PMI business activity index fell to 50.5 from 53.9 in February, hitting the lowest level since April 2025. It was below the flash reading of 51.2 but above the 50.0 mark that separates contraction from expansion.
Input price inflation rose to the highest since April 2025 due to a surge in fuel costs, while business optimism fell to its lowest for nine months.
According to S&P, many firms said the conflict in the Middle East had weighed on growth.
The composite PMI, which includes the manufacturing sector, declined to 50.3 in March from 53.7 in February, coming in below the flash reading of 51.0.
Tim Moore, economics director at S&P Global Market Intelligence, said: "UK service providers experienced a marked slowdown in output growth in March as the war in the Middle East encouraged greater risk aversion among clients and postponed investment decisions. Cutbacks to business and consumer spending meant that the rate of business activity expansion was the weakest seen since April 2025.
"Stagflation risks appear to have increased, with the final Services PMI data signalling slower growth and higher cost pressures than the earlier 'flash' estimates based on data compiled up to 20th March. Overall input cost inflation has accelerated sharply since February and was the strongest for 11 months, which was overwhelmingly linked to rising fuel and transportation bills. Many firms also noted that suppliers had sought to pass on higher prices paid for energy, raw materials and shipping.
"Rising global economic uncertainty due to the war in the Middle East contributed to a further decline in business optimism across the UK service economy. Confidence levels have fallen sharply after hitting a 15-month high in January. Service providers widely commented on fragile domestic economic conditions and concerns about the impact of rising inflation and higher borrowing costs on client demand over the year ahead."
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