Fresh survey data indicates that the United Kingdom's Services Purchasing Managers' Index (PMI) final reading for June declined further to 48.8 from May's 49.3, falling below the 50.0 threshold that separates expansion from contraction for a consecutive period. This marks the lowest level recorded since the beginning of 2023, signaling an acceleration in the contraction of the UK's services sector.

Weighed down by the contraction in service sector activity, the UK's private sector output also experienced a modest decline in June. The Composite Output Index final reading dropped to 49.3 from 49.7 in May, reaching its lowest point since April 2025.

Tim Moore, Economics Director at S&P Global Market Intelligence, noted that the latest data confirms that the UK economy has experienced a clear loss of growth momentum in the second quarter of 2026, following a brief period of recovery earlier in the year. The survey reveals that weak domestic demand, geopolitical uncertainty stemming from the Middle East conflict, and a widespread risk-averse sentiment among clients are the core factors driving the services sector contraction. Consequently, new business orders for UK services have fallen for the fourth consecutive month, and the downward trend in export orders since March this year continues. Furthermore, with businesses facing insufficient operational pressure, backlogs of work are persistently diminishing.

Regarding costs and pricing, the average cost burden for UK services firms continued to increase in June. Although input price inflation has moderated and the rate of output price inflation has recorded its slowest pace since February this year, the overall operational pressure on businesses has not been fundamentally alleviated.

Confronted with multiple macroeconomic headwinds, UK services firms' expectations for business prospects over the next year showed a slight improvement from the 13-month low touched in May. However, the overall market confidence index remains significantly below the long-term average for this survey.