Service sector bounces back in January as Omicron curbs ease

The closely-watched IHS Markit/CIPS UK Services PMI survey scored 54.1 in January, recovering from a 10-month low of 53.6 in December.

The service sector rebounded last month as Omicron fears eased (Damien Eagers/PA) (PA Wire)

The recovery of the UK service sector regained momentum last month as Omicron coronavirus restrictions and case numbers eased back, according to new figures.

The closely-watched IHS Markit CIPS UK Services PMI survey scored 54.1 in January, bouncing back from a 10-month low of 53.6 in December.

Any score above 50 shows growth in the sector.

The latest data showed that activity in the sector improved during the month as Plan B restrictions and concerns over the spread of the Omicron variant of Covid-19 eased.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply (CIPS), said: “There were some positive outcomes in January’s results.

“Business activity picked up in the biggest sector making up the UK economy as customer footfall improved and Omicron restrictions were wound up and put away.

“The improvement was slight but brought better news compared to the previous month’s falls, with an uplift in new business and a few more overseas orders coming though.”

Surveyed firms reported that new business growth “accelerated sharply” as forward bookings were buoyed by the easing of Omicron-related disruption.

Export sales also rebounded at the start of the year, as companies highlighted an increase in demand from China and the US.

However, firms also reported steeper cost pressures at the start of 2022.

Record price increases in the service economy are set to add to the cost-of-living crisis for UK households

Tim Moore, IHS Markit

Tim Moore economics director at IHS Markit, said: “Record price increases in the service economy are set to add to the cost-of-living crisis for UK households.

“Input cost inflation accelerated again in January and service providers responded by increasing their prices charged at the fastest rate since the index began in July 1996.”

Longer wait times to recruit new employees and widespread staff absences due to Covid-19 cases also contributed to another increase in backlogs of work across the sector in January.