The UK’s service sector maintained growth momentum in December, as indicated by data released on Monday, though the final quarter of the year remained subdued overall.

The S&P Global UK Services Purchasing Managers’ Index (PMI) increased slightly to 51.1 in December from November’s 50.8, although it came in below the preliminary estimate of 51.4. Since the reading stayed above the neutral 50-point threshold, it signaled continued—albeit modest—expansion in the sector.

“Business sentiment about 2025 remained cautious,” noted S&P Global. “Confidence regarding future growth stayed at the same 23-month low recorded in November, with service providers expressing concerns about potential cutbacks in both business and consumer spending, alongside the impact of rising employers’ national insurance contributions.”

Despite the marginal increase in overall business activity, the index for the final quarter of 2024 averaged its lowest level in a year, indicating sluggish momentum. New orders saw minimal growth, with the respective index slipping to its lowest point since October 2023. S&P Global attributed the near-stagnation to weakened client confidence following the autumn budget, particularly in anticipation of higher national insurance costs for employers. However, some firms reported stable demand in the technology sector.

“Subdued domestic and international economic conditions weighed on customer demand,” the report highlighted. “New export orders declined for the first time since September 2023, as weaker demand from EU clients offset gains from stronger US markets.”

Employment emerged as a notable weak spot. Staffing levels fell for the third consecutive month, with December registering the sharpest decline in workforce numbers since January 2021, nearly four years ago.

The composite PMI—which combines data from both the services and manufacturing sectors—dipped slightly to 50.4 in December from 50.5 in November, marking the lowest level since October 2023. The reading also came in just below the preliminary estimate of 50.5.

“December saw a slight contraction in new order volumes, bringing an end to a year-long period of expansion. Soft demand and rising payroll expenses contributed to the sharpest private-sector employment drop since January 2021,” S&P Global reported. “Meanwhile, overall cost pressures were the highest since April, driving a robust rise in prices charged by private sector firms at the end of 2024.”

Manufacturing activity remained under pressure, with the S&P Global UK Manufacturing PMI falling to 47.0 in December, its lowest level in 11 months, down from 48.0 in November.

The services PMI is based on survey responses from a panel of 650 firms collected between December 5 and 19.