The UK services sector experienced significant growth in August, driven by a late summer tourism boost, though the jobs market continued to weaken, according to a new report by accountancy and business advisory firm BDO.
The report highlights that output across the services sector—encompassing industries such as hospitality, culture, financial services, and real estate—reached a two-year high with a reading of 99.03 on BDO’s index. Any score above 95 signals growth, while a score below 95 indicates contraction. The recent surge in activity was attributed to new contracts and increased consumer and business spending, spurred in part by summer tourism.
BDO’s “poll of polls,” which consolidates data from the UK’s most influential business surveys involving more than 4,000 companies, noted that the services sector has benefited from renewed spending since the general election. This has led to a rise in demand for services across the board, from hospitality to professional sectors. As a result, many firms have been hiring additional staff to meet demand.
Despite the services sector’s positive performance, the UK’s overall jobs market is facing significant challenges. BDO’s employment index dropped for the 14th consecutive month, registering a reading of 95.89 in August, its lowest level since January 2013. While this reading still indicates growth, it suggests that employment conditions are becoming increasingly fragile.
The decline in the jobs market is being driven by a fall in vacancies as businesses scale back or freeze hiring amid ongoing economic uncertainty. Tougher market conditions, coupled with inflationary pressures and high interest rates, have forced many firms to reassess their staffing needs.
The latest figures underscore a widening disparity between the growth in the services sector and the weakening jobs market, as businesses face the dual challenge of maintaining output while adjusting to economic headwinds. As the UK economy continues to navigate these challenges, the services sector remains a key driver of growth, but the outlook for employment remains subdued.
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