UK's services sector has biggest fall in orders for nearly three years
Sounding the alarm over a loss of momentum amid a worsening global economic backdrop, the data provider S&P Global Market Intelligence said total new work in the sector, which accounts for about 80% of the economy, eased to the slowest pace since November 2022.
The survey of 650 companies in the sector, which includes finance, IT, communications and property but excludes retail, is closely watched by the Bank and the government for early warning signs from the economy.
Threadneedle Street is widely expected to cut borrowing costs at its next policy meeting on Thursday from the current level of 4.25% amid growing concerns about the strength of the economy.
Financial markets put the odds of a quarter-point reduction at 95%, amid rising unemployment and the hit to global trade from Donald Trump's fresh round of import tariffs unleashed last week.
Tim Moore, economics director at S&P Global Market Intelligence, said: 'Risk aversion and low confidence among clients were the main reasons provided for sluggish sales pipelines, alongside an unfavourable global economic backdrop.'
The survey showed that subdued sales pipelines and concerns about the rising cost of doing business led to an accelerated pace of job shedding, continuing a downward trend in employers' hiring intentions.
The headline purchasing managers' index for the services sector dropped to 51.8 in July, from 52.8 in June. A reading of 50.0 separates growth in output from a fall in activity.
Highlighting weakness in the UK jobs market, the employment index fell to 45.6 from 47.0, the lowest reading since February.
Moore said: 'Hiring trends were especially subdued, with total workforce numbers decreasing to the greatest extent since February. Worries about rising payroll costs were cited as the main factor holding back recruitment.'
Business leaders have issuing warnings that measures in Rachel Reeves's first autumn budget, including a £25bn rise in employer national insurance contributions (NICs) and 6.7% increase in the minimum wage, would hit jobs and growth.
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
Official figures show that unemployment rose to a four-year high of 4.7% in the three months to May, while the economy shrank in both April and May.
Matt Swannell, chief economic adviser to the EY Item Club, said it was 'almost certain' that the Bank's monetary policy committee would cut interest rates on Thursday.
'With the MPC balancing signs of fragility in the labour market against evidence of lingering inflationary pressure, the committee will likely signal that further gradual interest rate cuts remain appropriate.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
10 minutes ago
- The Independent
‘One in four councils could lose money' under Government's funding proposals
Around a quarter of councils in England could lose money under the Government's proposed reforms to how local authorities are funded, analysis has found. A report from the Institute for Fiscal Studies (IFS) said the changes would create big 'winners and losers' as ministers attempt to address perceived unfairness in levels of core funding across the country. Sir Keir Starmer's own council, Camden in north London, will be hit by the reforms when taking inflation into account, the IFS added. The think tank said Camden, along with other inner London boroughs including Westminster, will have less money to spend on services even if they increase council tax by the maximum amount allowed. Whitehall will provide a minimum level of funding, a so-called funding floor, for council leaders during the changes, but the IFS said overall cash for inner London town halls would be 11-12% lower in 2028-29 in real terms. The paper said: 'Around one in four councils would see real-terms falls in overall funding under the Government's proposals, with around 30 on the lowest funding floors seeing real-terms cuts of 11–12%. Conversely, another one in four councils would see real-terms increases of 12% or more.' The changes, which will come into effect from next year, are being consulted on by ministers. The Government plans to create a new methodology to assess local authority needs relatively and factor in population and deprivation. It will also assess need for adult and children's services. Overall spending will fall for 186 councils and rise by the same total sum for 161. One in 10 will see a fall in overall funding, while one in 10 will see an increase of 10% or more. The overall Government spend on local authorities will not change. The changes will be phased in across three years, from 2026/27 to 2028/29. Kate Ogden, co-author of the IFS report and a senior research economist with the think tank, said: 'England has lacked a rational system of local government funding for at least 12 years – and arguably more like 20. It is therefore welcome that the nettle of funding reform is being grasped, and some councils will benefit substantially under the new system. 'But the changes will sting for those councils that are assessed to currently receive too high a share of the overall funding pot, and so which lose out from moves to align funding with assessed spending needs.' The proposals are criticised in the report as 'not particularly redistributive to poor, urban areas of England'. It cites South Tyneside and Sunderland councils being among those to lose out from the reforms as slow population growth is accounted for. The report added: 'It is somewhat surprising that, on average, councils in the most deprived 30% of areas would see very similar changes in overall funding over the next three years to those for councils in the middle 40% of areas.' It noted that rural areas, which feared being badly hit by changes, will benefit from a 'remoteness adjustment' which will compensate areas with higher needs due to being far from large towns. London will gain the least, with a cash-terms increase in funding of 8% in the next three years. Analysis by the London Councils collective has highlighted the risk of the funding 'dramatically underestimating' needs for local services in parts of the capital. It noted the city has the highest rate of poverty in the country when housing costs are factored in. Outside the capital, the East Midlands (22%) and Yorkshire & the Humber (19%) are set to see the biggest increases in funding, with the South East set to see the smallest at 13%. However, the proposals have been criticised by youth charity the National Children's Bureau, which said it was 'significantly concerned' about the way the Government plans to work out needs for children's services. Ms Ogden added: 'The Government should consider giving highly affected councils which currently have low council tax rates greater flexibility to bring their council tax bills up to more typical levels to offset funding losses. 'More generally, reform of council funding allocations is just one part of the financial sustainability puzzle. Efforts to reduce demands on, and the cost of providing, local services through reform and the use of new technology will also be vital.' A spokesperson for the Ministry of Housing, Communities and Local Government said: 'The current, outdated way in which local authorities are funded means the link between funding and need for services has broken down, leaving communities left behind. 'That's why we are taking decisive action to reform the funding system so we can get councils back on their feet and improve public services, with the IFS recognising that our changes will better align funding with councils' needs.'
The Independent
10 minutes ago
- The Independent
Universities ‘keen' to offer places to students even if they miss grades
Universities will be keen to offer places on degree courses to school leavers on A-level results day even if they have narrowly missed out on grades, experts have suggested. The head of Ucas has predicted that a record number of 18-year-olds are expected to wake up on Thursday next week to the news that they have been successful in securing their first-choice university. There will be competition between universities to fill places with more UK applicants, creating a 'buyer's market' for students. The majority of institutions have courses available through clearing – which matches applicants to university places yet to be filled – in the week before A-level results day. It comes as universities have been warning of financial pressures due to uncertainty about the recruitment of overseas students as well as years of frozen tuition fees by domestic students. A sample of 129 of the UK's largest higher education providers showed more than 22,600 courses with vacancies for undergraduate students living in England were available on the Ucas clearing site as of Wednesday. Seventeen of the 24 elite Russell Group universities had vacancies on courses for English residents – a total of 3,630 courses between them. A similar analysis last year, in the week before A-level results day, showed 18 of the 24 universities had vacancies on courses for English residents – a total of 3,892 courses between them – on the clearing site. Clearing is available to students who do not meet the conditions of their offer on A-level results day, as well as those who did not receive any offers. Students who have changed their mind about what or where they wish to study, and those who have applied outside the normal application window, can also use clearing. Eight days ahead of exam results day, there was a total of 22,698 courses through clearing across 129 institutions. A similar analysis last year – carried out at the same point before A-level results day and looking at the same range of higher education institutions – showed there were 23,306 courses through clearing. Ucas figures released last month revealed that the number of offers made to prospective undergraduate students from universities and colleges has reached a record high this year. Jo Saxton, head of the university admissions service, said she expected there to be 'slightly fewer' courses with vacancies in clearing this year due to the high number of offers already made to applicants. She said: 'Whilst the system isn't capped, universities do know how many they want to accommodate in their lecture halls and facilities, and I think that a lot of that is going to have been already pinned down through applications and offer-making prior to results.' Overall, 94.5 per cent of all students who applied to higher education before the Ucas January deadline have received at least one offer, recent figures show. Speaking about A-level results day, the Ucas boss said: 'I would anticipate a record number of 18-year-olds will wake up with confirmation, quite possibly even where they are near-misses.' She added universities are increasingly 'falling back in love' with their three-year undergraduate applicants as there is more 'uncertainty' around the international market and which overseas students are going to turn up. Dr Saxton said: 'It's a really, really good year to be a UK-domiciled 18-year-old that wants to go to one of our world-class universities. 'A couple of the directors of admissions and vice-chancellors that I talked to have talked about recognising, actually, that a three-year undergraduate student is stability for your teaching and learning, for your university community, for your financial planning.' Nick Hillman, director of the Higher Education Policy Institute think tank, said this year's cohort of school leavers are 'well placed' to get where they want to study even if they have narrowly missed their university offer grades. He said : 'The financial plight of universities makes them very keen to fill their courses and they will be falling over themselves to sign up good potential students. 'Not everything is rosy, of course, as the cost-of-living crisis has affected the student experience in deleterious ways, but ambitious school leavers are nonetheless well-placed to get where they want to be in this year's admissions round.' Mike Nicholson, director of recruitment, admissions and participation at the University of Cambridge, which does not take part in clearing, said it is 'probable' that universities will be 'looking very carefully' at near-miss students this summer. He said: 'If the student, for instance, needed three As [and] gets AAB as long as the B is not in something that's absolutely crucial for the course, I think there's a very strong possibility the student would find they'd be getting a place. 'If universities have the capacity to take near-miss students I think they'll be very keen to take them this year because those students are already in the system, they've already committed, they've possibly already even applied for accommodation. 'So, it's a much easier process to follow through on than having to go out into clearing and recruit somebody from scratch at that point in the year.' Lee Elliot Major, professor of social mobility at the University of Exeter, said: 'This year is shaping up to be a buyer's market in admissions, with many universities competing to recruit more home students. 'It's driven by basic financial necessity: institutions need to fill degree places as uncertainty grows over international student intakes and budgets tighten across the sector. 'In an increasingly volatile admissions landscape, we must ensure that the focus on financial sustainability doesn't further exacerbate educational inequalities already embedded in the system.' Vivienne Stern, chief executive of Universities UK, said: 'It's certainly competitive between universities. 'From an applicant point of view, in a sense, that's a really good thing as it means you've got lots of choice. 'Clearing has changed, certainly compared to far back in the midst of time when I went to university when it used to be the kind of last-chance saloon, it's not that any more. 'Clearing is a much more widely-used tool for people to apply for the first time. 'It's also an opportunity if people want to change their minds they can use clearing to do that.' A Department for Education (DfE) spokeswoman said: 'While universities are independent from government and responsible for their own admissions decisions, it is essential that quality is maintained and that the students they admit are likely to succeed. 'Students deserve high-quality teaching, fair admissions and a clear path to good jobs, whether through a degree or technical route. 'Apprenticeship starts, participation and achievements are all on the rise, helping more people gain the skills they need.'
Reuters
11 minutes ago
- Reuters
South Korea June current account at biggest surplus on record
SEOUL, Aug 7 (Reuters) - South Korea posted a record-high current account surplus in June on strong demand for technology exports, central bank data showed on Thursday. The country's current account stood at a surplus of $14.27 billion, up from $10.14 billion in May. It was the biggest monthly surplus in the data series dating back to January 1980. The balance of goods logged a surplus of $13.16 billion, up from the previous month's $10.66 billion and the biggest since September 2017, on robust exports of semiconductors and computer devices, according to the Bank of Korea.
