The UK services sector shrank in June at its fastest pace since early 2021, with the Services Purchasing Managers' Index falling to 48.8 from 49.3 in May. Any reading below 50 signals contraction, and this marks the steepest monthly decline in three and a half years. Services account for the dominant share of UK economic output, making this a meaningful signal about the health of the broader economy.
A contracting services sector raises the probability of a UK recession and puts pressure on the Bank of England to cut interest rates sooner. UK-exposed equities — particularly banks, consumer discretionary, and domestically focused mid-caps — face earnings headwinds. Sterling may weaken as rate cut expectations are pulled forward, which in turn affects UK gilt yields.
Next Bank of England rate decision: August 7. Next UK GDP estimate: mid-July. Next UK Services PMI flash reading: late July.
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