The latest UK services PMI slipped into contraction as tensions in the Middle East raised costs and cooled demand. This page breaks down what the May PMI signal means for growth, where investment in the service sector is headed, and how global demand and energy costs might interact with UK activity. Read on for quick, clear answers to the questions people are likely to search right now.
The UK services PMI fell to 49.3 in May, marking the first contraction since April 2025. This suggests service activity is shrinking, with new work and export sales weakening. The easing in demand comes as energy costs rise and Middle East tensions add uncertainty. The reading aligns with a slower growth picture for the UK economy in the near term.
Tensions in the Middle East have raised energy costs and created global uncertainty, which dampens business and consumer spending. For UK services, higher input costs and cautious investment plans translate into softer demand and slower expansion in orders from abroad.
Investment plans within the service sector are becoming cautious as firms weigh higher energy costs and uncertain demand. This caution can slow expansion and hiring, even as some services sectors adapt with efficiency gains or pricing changes.
PMI trends in the UK don’t occur in isolation. A softer UK services PMI can reflect weaker global demand and higher energy costs worldwide. If global demand recovers and energy markets stabilise, we could see a lift in UK services activity; if tensions persist, risks to growth remain.
OECD projections suggest the conflict’s consequences could linger and influence UK growth beyond this year. This means the PMI could stay under pressure if energy costs stay elevated and demand remains uncertain, though policy responses and global conditions could alter the trajectory.
If tensions ease and energy costs stabilise, demand could improve and investment plans may pick up. The PMI would need to show renewed expansion (a reading above 50) as new work returns and exports strengthen, signaling a quicker service sector recovery.
The UK’s services industry declined last month for the first time in more than a year, as hospitality and travel businesses were among those to feel the impact of the Iran war, according to new figures.