𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The UK’s services industry declined last month for the first time in more than a year, as hospitality and travel businesses were among those to feel the impact of the Iran war, according to new figures.

The S&P Global UK services PMI survey showed a reading of 49.3 in May, down from 52.7 in April.

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

May’s score marked the first time business activity has decreased since April 2025.

This was mostly driven by a reduction in the amount of new work for businesses, for the third month in a row, although this was only marginal amid signs of ongoing resilience.

Firms surveyed suggested that worries about the conflict in the Middle East had led to some customers pushing back big spending decisions or cutting back on non-essential purchases.

Export sales also fell back in May, which was linked both to uncertain global economic conditions and increasing competition in major markets.

Services businesses are the dominant industry in the UK, spanning those from hospitality, leisure and travel, through to property, financial services and education.

The US-Israeli war in Iran has had significant ramifications around the world due to the effective closure of the Strait of Hormuz, one of the world’s busiest waterways, since the end of February.

This has cut off the transit of key commodities such as oil and fertiliser from the Middle East and sent global prices soaring.

Businesses in the UK have felt the knock-on impact of rising prices squeezing budgets and weakening consumer sentiment, the latest PMI survey showed.

Tim Moore, economics director for S&P Global Market Intelligence, said: “Many service sector companies noted that the Middle East conflict had an adverse impact on sales pipelines and general business prospects.

“Those in the hospitality and transportation sectors typically commented on squeezed discretionary spending and pressure from sharply rising input costs, while professional services firms reported a setback from rising risk aversion among clients.”

Firms were cutting jobs last month at the fastest rate since February, partly in response to higher labour and business costs, according to the survey.

Respondents said it was costing more to run their business, largely because of higher energy, fuel and transport costs.

But Mr Moore added that businesses making investments into technology services was a “bright spot for parts of the service economy” last month.

Matt Swannell, chief economic adviser to the Item Club, said: “We think the economy will continue to lose momentum and flirt with recession in the second half of the year.

“Rising energy bills and a deteriorating jobs market will squeeze households’ spending power further.

“Meanwhile, tighter financial conditions, elevated costs, and prolonged uncertainty will lead businesses to postpone or cancel some investment plans.”