UK services sector grows in January but job losses continue
By Michele Maatouk
Date: Wednesday 04 Feb 2026
(Sharecast News) - Activity in the UK services sector grew in January at the fastest pace since last August, but job losses continued, according to a survey released on Wednesday.
The S&P Global UK services PMI business activity index rose to 54.0 from 51.4 in December, coming in above the 50.0 mark that separates contraction from expansion for the ninth month in a row.
However, the survey also showed that hiring remained a weak spot for the services sector despite signs of a recovery in business activity and incoming new work.
S&P noted that employment numbers have fallen in each month since October 2024, which represents the longest period of job shedding for 16 years. The latest survey indicated a faster decline in workforce levels than in December, with anecdotal evidence highlighting squeezed margins, fragile market conditions and efforts to boost productivity through automation.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The latest survey revealed an encouraging start to 2026 for the UK service sector, following a sluggish end to last year. Output growth was the fastest for five months, supported by an uplift in investment sentiment and greater new order intakes. A number of firms suggested that post-Budget clarity had contributed to a broader improvement in client confidence, while some also cited rising export sales.
"Despite a recovery in total new work, service providers still reported that consumer demand was constrained by squeezed disposable incomes, while risk aversion in response to geopolitical tensions was a factor holding back business spending.
"Service sector companies appear cautiously optimistic about their growth prospects for the next 12 months, with confidence the highest seen since October 2024. However, there were again gloomy signals for the UK labour market outlook as staff hiring decreased at a steeper pace in January as firms looked to offset rising payroll costs. Another sharp increase in overall input prices contributed to the fastest rate of output charge inflation for five months."
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