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Growth in the UK’s services sector rebounded last month with business activity picking up, but firms face a “short-lived” recovery amid surging costs and lower demand linked to war in the Middle East, a new survey has shown.

Experts cautioned that the outlook for firms may be weaker after a rush of activity in April.

The S&P Global UK services PMI survey showed a reading of 52.7 in April, up from 50.5 the previous month.

Any reading above 50.0 means the sector is growing while any reading below signals it is contracting.

Activity across the industry, which spans businesses from hospitality and leisure to healthcare and transport, has been increasing for almost a year.

But while the latest reading marked an improvement from March – when the US-Israel’s conflict with Iran escalated – it signals a slower rate of growth than at the start of the year.

Businesses taking part in the survey, which is watched closely by economists, cited worries about intensifying pressures on inflation, global supply shortages and elevated borrowing costs as factors holding back business and consumer demand in April.

Some firms said export sales were lower due to disruptions to business travel and weaker demand in the Middle East.

Nevertheless, others pointed out resilient global demand for technology services while backlogs of work also decreased.

But the survey revealed that cost pressures ramped up for businesses in the service industry last month.

Costs for companies rose at the fastest pace since November 2022, with firms widely attributing the increased bills to fuel costs and higher prices for raw materials including metals and plastics, which have been driven up by soaring energy prices since the start of the war.

Many firms also cited pressure from higher wages, following the increase to the national minimum wage at the start of April.

Tim Moore, economics director at S&P Global Market Intelligence, said April’s “modest recovery” for the industry could “easily prove short-lived as new business intakes remained subdued in comparison to the start of 2026”.

Mr Moore said: “Survey respondents widely noted that the Middle East conflict and subsequent global supply chain disruptions had weighed heavily on business and consumer confidence.”

Matt Swannell, chief economist for the Item Club, agreed that there were “already some signs that this jump will be short-lived as businesses reported little improvement in new work amidst weak domestic and foreign demand”.

“We think that the outlook for private sector activity is gloomier,” he went on.

“A sharp rise in inflation will cause households’ real incomes to fall and spending growth to slow.

“Supply chain disruption, rising costs and lingering geopolitical uncertainty will cause some businesses to put their investment plans on hold.”

Mr Swannell added that the survey suggests the Bank of England will prefer to keep interest rates held steady for the rest of the year, but that there was the potential for a hike in the summer.

Thomas Pugh, chief economist at RSM UK, said firms showed “resilience” last month, adding: “However, the rebound is partly fuelled by a rush of activity before price rises and supply shortages start to bite.”

He said future interest rate hikes were “more likely” as a result, but that “everything depends on how energy prices move going forward”.