What's happened
The S&P Global UK services PMI has fallen to 49.3 in May, marking the first contraction since April 2025. New work is shrinking while export sales also weaken amid upheaval in the Middle East, with energy costs rising and investment plans cautious across the sector.
What's behind the headline?
What this means for the UK economy
- The services sector has contracted in May after 14 months of resilience, signaling a potential broader slowdown.
- Firms report weaker demand and rising costs from energy, fuel and transport, which could squeeze margins further.
- Investment in technology services is a bright spot, suggesting pockets of resilience amid headwinds.
Why the story is urgent
- A renewed drag on growth comes as employment costs rise and consumer sentiment weakens, risking a softer economy into the second half of the year.
- The OECD’s outlook points to continued pressure on GDP growth, with risks of further slowdown if energy costs stay elevated.
What to watch next
- Any rebound in new orders or a stabilization in export demand could offset some pressure.
- Further policy guidance from OECD-aligned forecasts and energy-price developments will shape revisions to growth expectations.
How we got here
May’s PMI confirms a slowing service economy. The Middle East conflict, notably the Iran‑related disruption to the Strait of Hormuz, has heightened input costs and weighed on consumer spending. The OECD has warned the conflict’s consequences could linger and influence UK growth this year and next.
Our analysis
The Scotsman reports the May PMI reading and comments from Tim Moore of S&P Global Market Intelligence, with reference to OECD projections. The Independent provides a parallel narrative on the same PMI data and commentary. Both sources emphasize the Middle East conflict’s impact on demand, costs, and investment.
Go deeper
- Will May’s PMI recovery occur in the next release if energy prices ease?
- Are businesses shifting more capex into technology services to cope with higher costs?
- How will OECD forecasts influence UK growth revisions this year?
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Iran - Country in the Middle East
Iran, also called Persia, and officially the Islamic Republic of Iran, is a country in Western Asia. It is bordered to the northwest by Armenia and Azerbaijan, to the north by the Caspian Sea, to the northeast by Turkmenistan, to the east by Afghanistan a
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United States - Country in North America
The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.
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United Kingdom - Country in Europe
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the northwestern coast of the European mainland.