UK service sector gains momentum,

  Key findings

  Embargoed until 0930 BST (0830 UTC) 5 April 2022

  News Release

  S&P Global / CIPS UK Services PMI®

  Source: S&P Global, CIPS.

  UK service providers signalled an exceptionally strong

  increase in business activity during March and the rate of

  expansion accelerated to its fastest for 10 months. Survey

  respondents widely noted that the removal of pandemic

  restrictions and return to offices had led to a sharp rebound

  in customer demand.

  However, business expectations for the year ahead dropped

  for the second month running and were the lowest since

  October 2020. Weaker optimism was mainly linked to the war

  in Ukraine and subsequent economic uncertainty. Severe

  cost pressures also weighed on confidence and led to a rapid

  rise in output charges. The rate of prices charged inflation

  was the steepest since the index began in July 1996.

  The headline seasonally adjusted S&P Global / CIPS UK

  Services PMI® Business Activity Index rose for the third

  month running to reach 62.6 in March, up from 60.5 in

  February. This highlighted a continued rebound in output

  growth from the Omicron-related slowdown seen at the

  end of last year. Moreover, the rate of expansion was the

  second-strongest since May 1997 (exceeded only by the

  post-lockdown recovery in May 2021).

  Higher levels of business activity were supported by a strong

  rise in new work during March. More than twice as many

  survey respondents (31%) reported an increase in new orders

  as those that signalled a fall (15%). Businesses operating in

  the travel, leisure and entertainment sectors commented on

  especially strong demand during the latest survey period.

  Greater business requirements and robust long-term

  expansion plans fuelled another month of strong job

  creation in March. The latest rise in staffing numbers was the

  fastest since October 2021. Survey respondents suggested

  that tight labour market conditions had made it difficult to

  fill vacancies and pushed up starting salaries.

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  Recruitment difficulties, capacity constraints and worsening

  supplier performance all contributed to an increase in

  backlogs of work across the service economy in March.

  Higher levels of unfinished business have been recorded in

  each of the past 13 months, although the latest rise was the

  slowest so far in 2022.

  An unprecedented 40% of the survey panel reported an

  increase in their average prices charged in March, while only

  3% signalled a decline. The resulting seasonally adjusted

  Prices Charged Index pointed to the strongest rate of

  inflation since the survey began in July 1996.

  Another rapid rise in output charges was overwhelmingly

  linked to higher salary payments and increased prices paid

  for energy, fuel and raw materials. Around 65% of the survey

  panel reported a rise in their operating expenses in March,

  while less than 1% noted a decline. The latest index reading

  signalled the second-fastest rate of input cost inflation since

  the survey began (exceeded only by the record high seen last

  November).

  Concerns about the impact of escalating inflationary

  pressures on household budgets acted as a brake on growth

  expectations across the service sector in March. Survey

  respondents also cited uncertainty related to the war in

  Ukraine and greater hesitancy among clients. The overall

  degree of positive sentiment regarding the business outlook

  dropped to its lowest for 17 months.

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