British services businesses recorded their strongest expansion in eight months during October, supported by improving customer demand and a return to employment growth, although rising operating costs continued to put pressure on margins.
The final S&P Global UK Services Purchasing Managers’ Index increased to 52.8 from 52.1 in September, indicating a stronger rate of expansion across the sector.
The result was slightly below the preliminary estimate of 53.1 but represented the highest reading since February.
The index is compiled from monthly responses provided by services businesses, with figures above 50 indicating expansion compared with the previous month. It measures the direction of reported activity rather than the percentage change in economic output.
S&P Global Market Intelligence found that new business increased at its fastest pace since January, with companies reporting stronger order pipelines and improved demand for professional and technology-related services.
Investment in artificial intelligence was identified as one contributor to the increase in workloads, with some businesses reporting additional customer expenditure on technology and associated services.
Tim Moore, economics director at S&P Global Market Intelligence, said: “Greater workloads were attributed to an improved pipeline of sales opportunities, particularly those linked to AI investment spending.”
The increase in new orders was accompanied by a recovery in recruitment. The survey’s employment index moved above the neutral 50-point threshold for the first time since September 2024, ending a prolonged period of reported workforce reductions.
Although the movement signals a return to employment growth among responding businesses, the survey does not establish a corresponding increase in employment across the entire UK economy.
Recruitment activity remained restrained, reflecting continued efforts to control staffing expenditure while businesses assessed whether stronger demand would persist.
Companies also reported increased cost pressures. Input-price inflation accelerated to its fastest rate since May, indicating that businesses were experiencing larger increases in the prices of goods and services required for their operations.
The rate of inflation in prices charged to customers eased slightly compared with September, despite the stronger increase in operating costs.
That divergence suggests companies were not passing through all additional expenditure at the same pace, potentially limiting margins where operating costs were increasing faster than selling prices.
The wider private-sector economy also expanded more quickly during October. The composite PMI, which combines manufacturing and services activity, increased to 52.9 from 52.0 in September.
This was also the highest composite reading since February, indicating that stronger services demand was accompanied by improving activity elsewhere in the private sector.
Manufacturing production contributed to the increase, although conditions varied between different industries and business activities.
The survey’s measure of future business activity rose to its highest level since February, suggesting that companies had become more optimistic about expected workloads over the coming year.
Those expectations were accompanied by concerns about the cost environment, including the possibility that sustained inflation could affect demand and investment decisions.
The combination of improving output, rising employment, and higher operating costs contributes to the broader economic evidence considered when assessing inflation and monetary conditions.
For companies, the survey describes a recovery in demand accompanied by a continuing need to manage expenditure. Stronger sales activity provides additional opportunities for growth, while input-price increases can restrict the financial benefit of higher workloads.
The final October figures establish a stronger start to the fourth quarter for the services sector, with improved new business, renewed job creation, and the fastest expansion in eight months.
