The UK services sector has now recorded two consecutive years of UK services sector job losses, with September’s employment decline marking the longest such run of workforce reductions in 16 years, according to S&P Global. The figures come as the UK unemployment rate has crept up from around 4.2 per cent to 4.9 per cent over the last 24 months.
UK services sector job losses signal deepening labour market strain
S&P Global’s monthly purchasing managers’ index (PMI), a survey of hundreds of companies tracking activity in the private sector, recorded a further fall in services employment in September. That extended an unbroken sequence of monthly declines that began in October 2024. Researchers at S&P Global noted that the pace of the decline was the slowest since October 2025, though the direction remained firmly downward.
Companies told S&P Global’s researchers that higher payroll costs and the deployment of artificial intelligence were allowing employers to leave voluntary leavers unreplaced rather than cutting headcount outright. The net effect is the same: a steady, cumulative erosion of the services workforce at a moment when those employers are also grappling with rising input costs.
The scale of the reduction over recent months is laid out in a separate S&P Global release, which indicated that the PMI was signalling around 50,000 job losses in the three months to September. That figure gives a clearer sense of the cumulative pressure the sector has absorbed beyond the monthly survey readings.
PMI reading holds above contraction but inflation pressure builds
The headline PMI reading slipped to 52.1 in September, down from 52.5 in August. A reading above 50 denotes expansion, so the sector continued to grow, but the margin is narrowing and the employment picture sits in sharp contrast to that headline output figure.
Martin Beck, chief economist at WPI Strategy, said the data carried dangers around inflation, with services input-cost inflation hitting a three-month high and the pace at which firms were raising their own prices the fastest since May.
‘The near-term path for headline inflation remains heavily dependent on global energy markets, which UK monetary policy can do nothing to influence,’ Beck said. ‘There is still limited evidence that higher oil and gas prices are generating a broader and more persistent surge in underlying inflation. Any easing in geopolitical tensions that brought energy prices down would therefore remove one of the biggest immediate headwinds facing both households and businesses.’
On Monday, the Brent crude oil price, an international benchmark for energy costs, edged higher to $102 per barrel. The Bank of England has predicted that inflation would top four per cent in the early parts of next year, a prospect that compounds the difficulty facing consumers already contending with a weakening jobs market.
Budget and fiscal risks add to the pressure
Against that backdrop, fresh analysis by EY has suggested that John Healey’s buffer against a borrowing target could be wiped out entirely if the Strait of Hormuz remains shut in the middle of next year. The assessment has sharpened concerns that further tax rises may be needed to keep day-to-day spending in line with receipts in the third year of the fiscal forecast.
Beck warned that the Budget itself could undo what he described as ’emerging resilience’ in the UK economy if the Chancellor moved to impose sweeping tax hikes on businesses and households. The jobs data, he said, already pointed to an economy navigating a difficult stretch without the additional weight of fiscal tightening.
The 16-year record for sustained UK services sector job losses now confronts policymakers with a labour market that is losing ground even as the headline activity index holds in positive territory, a combination that narrows the room for optimism heading into the autumn fiscal statement.
