According to the latest S&P Global UK Services PMI, the Services Business Activity Index rose to 54.0 in January from 51.4 in December, marking the fastest pace of growth since August 2025 and a ninth consecutive month of expansion.
Employment across the service economy, however, fell for a 16th consecutive month, representing the longest stretch of job losses since the global financial crisis.
Hiring remains weak
S&P Global said firms continued to leave vacancies unfilled and reduce headcount in response to rising payroll costs, squeezed margins and efforts to boost productivity through automation.
Hospitality and leisure businesses were repeatedly cited as facing particularly challenging trading conditions, alongside concerns over rising business costs and subdued long-term growth prospects.
Tim Moore, economics director at S&P Global Market Intelligence, said the survey highlighted a growing disconnect between activity and employment.
‘Gloomy signals’
“The latest survey revealed an encouraging start to 2026 for the UK service sector,” he said. “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.”
Moore added that higher input prices and wage pressures were contributing to faster inflation in prices charged, even as consumer demand remained constrained by squeezed disposable incomes.
The findings add to evidence of mounting employment pressure in hospitality, following data showing almost 9,000 jobs were lost across the sector in December, despite the festive trading period, and warnings that staffing levels remain well below autumn 2025 levels.
They also sit alongside earlier industry surveys indicating nearly a third of hospitality businesses now have no cash reserves, with many operators warning further cost increases could force job cuts, reduced hours or price rises.
S&P Global said service sector confidence improved in January, with business optimism reaching its highest level since October 2024, despite ongoing weakness in employment.
