UK Services PMI Falls Below the 50 Threshold to 48.7, New Prime Minister Inherits Troubled Economy

(1) The preliminary value of the UK Services Purchasing Managers’ Index for June, published by S&P Global, fell to 48.7, lower than May’s reading of 49.3 and significantly below the market expectation of 50.1, marking the lowest level since January 2023. This highlights that service sector activity is contracting at the fastest pace in nearly three and a half years. (2) The survey shows new business orders fell to their lowest point since January 2021, with the employment indicator also registering a sharp drop. Companies are accelerating layoffs, and S&P Global warns that overall cost pressures remain relatively high, with only energy costs seeing some relief due to expectations of a ceasefire between the US and Iran. (3) Following Starmer’s resignation announcement on Monday, the service PMI data further confirms the economic predicament facing potential new Prime Minister Burnham: the UK economy shrank by 0.1% in May and is likely to remain weak in June, with second-quarter growth nearly stalled and the initial momentum fully reversed. (4) The manufacturing PMI also retreated from 53.9 to 53.1, hitting a three-month low, while the composite PMI fell to 49.4, the worst reading since April 2025. The sector’s consistent contraction indicates that overall private sector activity is cooling off across the board. (5) S&P Global notes that domestic political instability has disrupted confidence among some businesses, and with employment continuing to decline at an alarming rate amid a lack of new business, the UK economy needs a period of stable policy to regain recovery momentum.