Britain’s services sector grew at its fastest pace in eight months in October — just as the Bank of England prepares to decide whether to raise interest rates for the first time in more than three years.
Key Points
- The S&P Global UK Services PMI rose to 52.8 in October from 52.1 in September, its highest since February, Reuters reported; above 50 means growth.
- The composite PMI, combining services and manufacturing, rose to 52.9 from 52.0, also the highest since February.
- The Bank of England is expected to raise Bank Rate from 3.75% to 4% on Thursday 5 November, with September inflation at 3.5%.
- The Times shadow Monetary Policy Committee unanimously recommended a hike to protect the Bank’s credibility.
Growth, with a sting in the tail
The survey’s message is double-edged. Rising orders and employment drove the strongest services sector growth since the US–Iran conflict began in February — a sign of resilience in the economy’s largest sector. But firms also reported sharper cost pressures, which is exactly the kind of evidence that pushes a central bank towards a rate rise.
That is why Thursday’s decision is so finely balanced in public debate, even though markets increasingly expect a hike. Inflation at 3.5% is well above the Bank’s 2% target, with forecasts suggesting it could exceed 4% early next year. The shadow MPC’s unanimous call for 4% — the first rise in more than three years — adds to the pressure.
What a hike would mean
For households, a rise to 4% would filter through to mortgage pricing in the coming weeks, at a moment when the cost of employing a minimum-wage worker has already risen by up to 31% since Labour took office, according to the Centre for Policy Studies. For businesses, it would raise borrowing costs just as many are absorbing last week’s Budget measures — a survey found 52% of British firms expect to be worse off as a result.
The Bank’s dilemma is familiar: raise too slowly and inflation becomes embedded; raise too fast and a recovering economy stalls. October’s PMI suggests the economy can still grow — but the cost pressures inside it suggest the Bank may not want to wait to find out how much longer.
The services result also fits a wider pattern in Wednesday’s data: eurozone inflation and US employment figures due later in the day will be read alongside it, as investors try to judge whether Britain’s price pressures are a local story or part of a global one. For now, the survey gives the Bank both a reason to act and a reason to be careful — growth to protect, and costs to contain.
What happens next
The decision lands on Thursday 5 November, and the Bank’s accompanying forecasts will matter as much as the rate itself. A hike with a dovish message could calm markets; a hold after weeks of hike expectations would be the bigger surprise. Either way, Britain’s borrowers will know by Thursday lunchtime which way the wind is blowing.
Sources
- Reuters via KTWB — https://ktwb.com/2026/11/04/uk-services-growth-hits-8-month-high-in-october-pmi-shows/
- CPA UK business round-up — https://cpa.co.uk/uk-business-news-today-4-november-2026-economy-markets-insolvencies/