UK services firms raise prices at fastest rate since May amid fuel surge

Growth in the UK’s services industry slowed last month, with firms raising their prices at the fastest pace since May in the face of higher fuel and energy costs, a new survey has shown.

The S&P Global UK services PMI index showed a reading of 52.1 in September, down from 52.5 in August.

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

The score came in higher than an earlier estimate of 51.7 and it marked the third month in a row that business activity has increased.

Firms surveyed reported surging fuel prices and increased pay for staff as factors pushing up overall business costs last month.

Efforts to protect their margins led to companies raising the prices they charge customers at the fastest pace since May, the survey found.

September’s survey also marked two years of continuous job cutting across the services industry, albeit at the slowest rate for nearly a year.

Companies using new technology including artificial intelligence (AI) reported it as a reason for not needing to replace workers when they leave.

Services firms span subsectors including hospitality and leisure, real estate and financial services, healthcare and transport, and is the dominant industry in the UK.

Tim Mooreeconomics director for S&P Global Market Intelligence, said: “Surging fuel prices due to the Middle East conflict continued to drive up input cost inflation in September.

“This led to the sharpest increase in prices charged by service sector companies since May and therefore signalled a clear reversal of the slowdown seen in the middle of 2026.”

The average price of diesel has rocketed to an all-time high, hitting £2 a litre last week. Petrol has also been on the rise and average prices are around 42p a litre more than since the start of the Iran war.

Businesses say this has been making transportation more expensive for them and across their supply chains, while they have also faced higher oil and gas prices and international shipping disruption.

Thomas Pugh, chief economist for RSM UK, said increased pressure on prices across the sector “will worry the MPC (Monetary Policy Committee) and boosts the case for rate hikes later this year”.

The Bank of England committee has been watching closely for signs of second-round inflation effects which happen as a result of higher prices in the economy.

This includes businesses increasing their prices because they expect consumer behaviours to change or competitors to do the same.

Mr Pugh said the next six months “look more challenging”, adding: “Rising energy prices risk pushing inflation above 4% early next year, which will push up business operating costs, squeeze households’ real incomes and potentially force the Bank of England to hike interest rates later this year.”