Services firms start hiring again as growth hits an eight-month high

Britain's services sector grew at its fastest pace in eight months in October, and firms took on extra staff for the first time after two years of job cuts, according to a closely watched survey of businesses.

The S&P Global UK services purchasing managers' index (PMI) rose to 52.8 in October, up from 52.1 in September. Any reading above 50 means the sector is growing. It was the strongest figure since February.

Hiring is back

Stronger customer demand brought in more new orders, and the extra workload led firms to recruit more staff in October. That ends two consecutive years of continuous job cuts across the sector, during which many businesses blamed rising labour and running costs, or chose not to replace staff who left.

Some firms said sales had been boosted by customers investing more heavily in artificial intelligence, a trend that has helped fuel recent economic growth.

The services sector covers everything from pubs, restaurants, theatres and salons to property, professional and financial services firms, and is by far the biggest part of the UK economy. In Birmingham, it includes the large cluster of banks, law and accountancy firms around Colmore Row and Brindleyplace, as well as the city's shops, hotels and hospitality.

"Increasing economic resilience"

Tim Moore, economics director at S&P Global Market Intelligence, said the survey signals "increasing economic resilience despite challenges from geopolitical tensions, elevated cost pressures and subdued consumer confidence".

He noted, though, that while recruitment had revived, "the pace of job creation was only marginal as firms noted efforts to control costs and prioritise efficiency gains where possible".

Costs are still rising

There is a catch. The survey found costs for service businesses rising at their fastest rate for five months, driven by energy, fuel and transport costs, wages and raw materials, and firms again passed those increases on to customers through higher prices.

Matt Swannell, chief economic adviser to the EY Item Club, said: "The UK economy has shown surprising resilience in the second half of the year, defying the post-pandemic trend of a slowdown in the second half."

But he warned that much of the strength comes from IT and professional services, adding: "In a two-speed economy, consumer-facing services will come under increasing pressure as households' spending power is squeezed."

What it means locally

For job seekers in Birmingham, a return to hiring in services is welcome news heading into the busy Christmas season. The picture is strongest in professional and technology-related work, while shops, cafés and bars may still find the coming months tougher.