UK services PMI slides in July following ‘disappointing’ business growth and job creation | City A.M.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI), seen as a barometer of economic health, fell in July to 54.3 from June’s 54.9.

The index signalled the slowest expansion of service sector output for three months, raising questions over the Bank of England’s (BoE) decision to raise interest rates yesterday from 0.5 per cent to 0.75 per cent.

While anything above 50 indicates growth, EY economic adviser Howard Archer nevertheless branded the survey results “disappointing all round”.

The purchasing managers report activity in the dominant services sector slowed to a three-month low in July, while a moderation in new business growth does not bode well for a renewed pick-up in activity in the near-term at least.”

Some tourist-related businesses recorded boosted sales from the hot weather, while others found the combination of scorching temperatures and the World Cup disruptive for businesses.

Read more: Happy days: The UK’s services sector outperformed expectations last month

Brexit continued to delay decision making and had made clients more risk-averse, the survey said, hampering growth in July.

The rate of job creation was found to be weakest since August 2016, with some survey respondents attributing this to tight labour market conditions, automation and staff headcount cutting.

IHS Markit associate director Tim Moore said: “While it’s difficult to quantify the precise impact of the recent heat wave on overall business performance, some survey respondents reported that a combination of hot weather and the World Cup had weighed on consumer footfall. These short-term disruptions and a general slowdown in new business growth appear to have offset the boost to tourism-related activity from the extended dry period in July. “

He warned that tight labour market conditions and rising wage pressures were also a “key challenge” for businesses in the service sector, as well as a lack of skilled workers to fill vacancies.

The BoE’s decision to raise interest rates yesterday was widely expected by economists, who were divided on whether the hike was justified.

Alpesh Paleja, principal economist at the Confederation of British Industry, said the rate rise “has been building”, while noting that tightening will remain “very slow and limited”.

Suren Thiru, head of economics at the British Chamber of Commerce, said the decision was “Ill-judged against a backdrop of a sluggish economy”.

Read more: Gradual or glacial: When will the next Bank of England rate hike come?