UK services sector contraction accelerates in June – PMI

The data released on Tuesday showed that Britain’s dominant services sector contracted in June, weakening at the fastest rate since January 2023, that further darkens the picture of the British economy and adds to political uncertainty following resignation of PM Starmer on Monday.

Preliminary UK Services Purchasing Managers’ Index (PMI) fell to 48.7 in June from 49.3 previous month and strongly disappointed expectations for 50.1 growth.

The indicator stays below 50 threshold which separates growth from contraction for the third consecutive month, with main contributors to weak June numbers being sharp declines in employment and new business, with the latter hitting its lowest in 5 ½ years.

Downbeat services PMI came just a day after PM Starmer’s resignation and warned about difficult economic position Starmer’s successor will face at the start of the mandate, as economic growth remains anemic, inflation higher than in other developed economies, as well as weakening labor sector and strained public finances.

Economists, however, show slight optimism on expectations of peace deal in the Middle East, as the war was one of the strongest negative factors that hit UK economy, but also warned that recovery process might be slower and longer than initially expected.

The same report showed slightly brighter picture in manufacturing sector, as manufacturing stays firmly above 50 level, although fell to 53.1 in June from 53.9 in May, warning of persistently slowing growth in Britain’s factories.