Services sector hit as Iran conflict softens demand

The UK services industry reported the steepest decline in activity last month for three-and-a-half years as the Iran war drove up costs and dampened demand, according to new figures.

The S&P Global UK services PMI survey showed a reading of 48.8 in June, down from 49.3 in May and the lowest since January 2023.

Any reading above 50 separates growth from contraction.

June’s reading marked the second month in a row that activity has declined.

Businesses in the sector, which includes hospitality, leisure, transport and financial and professional services, typically reported lacklustre economic conditions in the UK and general risk-averse sentiment among clients linked to the Middle East conflict.

Alongside uncertainties stemming from the war in Iran, political uncertainty in the UK was negatively affecting client confidence, according to the survey.

Job-cutting continued in June, at the fastest rate since February, largely in response to rising business costs.

However, some hospitality firms said the football World Cup had boosted demand in recent weeks, as supporters flocked to pubs and venues.

Tim Moore, economics director at S&P Global Market Intelligence, said: “June data confirmed a clear loss of momentum for the UK economy during the second quarter of 2026, following a positive start to the year.

“Strong cost pressures, lacklustre demand and business uncertainties arising from the Middle East conflict were the most prominent themes highlighted.”

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