UK services sector marks two years of job losses
The UK’s dominant services sector has suffered two years of continuous job losses despite moderate growth against the backdrop of intense trading disruption and high borrowing costs, new data has indicated.
Researchers at S&P Global said a fall in employment over September across services firms meant the sector had now suffered two consecutive years of job cuts.
Its monthly purchasing managers’ index (PMI), a monthly survey of hundreds of companies tracking activity in the private sector, suggested that the decline in workforce numbers was the slowest since October 2025.
Researchers were told that higher payroll costs and the deployment of AI allowed employers to not replace voluntary leavers.
The data points to intensifying risks for the jobs market as the UK unemployment rate has crept up from around 4.2 per cent to 4.9 per cent over the last 24 months.
Jobs crunch and Budget jitters
The PMI reading dropped to 52.1 in September, down from 52.5 in the month before. The reading signalled that activity in the private sector continued to expand as it still crossed the 50-figure threshold for neutrality in output.
Martin Beck, chief economist at WPI Strategy, said survey data showed there were dangers around inflation as services’ input-cost inflation hit a three-month high and the pace at which firms increased their own prices was the fastest since May.
“The near-term path for headline inflation remains heavily dependent on global energy markets, which UK monetary policy can do nothing to influence,” Beck said.
“There is still limited evidence that higher oil and gas prices are generating a broader and more persistent surge in underlying inflation. Any easing in geopolitical tensions that brought energy prices down would therefore remove one of the biggest immediate headwinds facing both households and businesses.”
On Monday, the Brent crude oil price, an international benchmark for energy costs, inched higher as it hit $102 per barrel.
Economists have warned that the upcoming months could be particularly difficult for consumers in Britain. The Bank of England predicted that inflation would top four per cent in the early parts of next year.
Fresh analysis by EY has suggested that John Healey’s buffer against a borrowing target could be wiped out entirely by the Iran war if the Strait of Hormuz remains shut in the middle of next year. The economic update has raised fears of fresh tax hikes being imposed in order to keep Healey on track to level day-to-day spending with receipts in the third year of the fiscal forecast.
Beck warned that the Budget could remove “emerging resilience” from the UK economy if the Chancellor moves to impose sweeping tax hikes on businesses and households.