UK Economy Remains Steady in September Amid Brexit Worries

UK economy remained stable and exhibited steady growth amid Brexit uncertainties in September, according to a private survey released on Wednesday (3).

September data pointed to another solid increase in business activity across the UK service sector, with the rate of growth easing only slightly since August. The latest survey indicated the fastest rise in employment numbers for seven months, which firms attributed to the need to alleviate stretched capacity and meet long-term business expansion plans.

Meanwhile, higher fuel prices led to another sharp rise in input costs, but relatively subdued demand conditions meant that output charges rose at the slowest pace since June 2017.

The seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index posted 53.9 in September, down from 54.3 in August. However, the latest reading was still above the 50.0 no-change value and slightly stronger than the average in 2018 so far (53.6).

Higher levels of business activity were attributed to a solid increase in new work and competitive pricing strategies during September, said IHS Markit / CIPS UK Services PMI.

Survey respondents noted that Brexit concerns among clients and heightened economic uncertainty remained the main constraints on growth.

Latest data indicated a moderate increase in employment numbers, with the rate of job creation the strongest since February. Anecdotal evidence suggested that tight labour market conditions had led to difficulties filling vacancies and often pushed up starting salaries.

Higher wage bills and rising fuel prices resulted in a sharp increase in cost burdens across the service sector in September. The overall rate of input price inflation was the fastest for three months and well above the low seen in February. However, prices charged by service providers increased at only a moderate pace, with the latest rise the slowest for just over one year.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey said, “the service sector continued to report solid steady business growth in September which, alongside news of sustained expansions in both manufacturing and construction, suggests the UK economy expanded by just under 0.4 per cent in the third quarter.”

Service sector firms recorded a slight upturn in confidence regarding the business outlook during September, although the degree of optimism remained subdued in comparison to the survey average.