UK Services Sector Grows Amid Rate Hikes and Rising Insolvency Risks

The UK services sector posted its strongest growth in eight months, with the PMI reaching 52.8, driven by increased workloads and hiring. However, rising input costs and expectations of a Bank of England rate hike to 4.00% are adding pressure on businesses. Insolvency notices continue to rise, with 37 companies entering formal proceedings in recent days.

The UK services sector recorded its strongest growth in eight months, with the S&P Global services PMI rising to 52.8 in October 2026 from 52.1 in September, marking the highest level since February of that year. This expansion was driven by increased workloads and a rebound in hiring, ending a prolonged period of job cuts. However, input costs rose to a five-month high, with around 40% of firms reporting higher expenses, adding pressure on margins. At the same time, 37 companies entered formal insolvency proceedings—administrations, liquidations, or winding-up actions—highlighting persistent financial fragility despite operational growth. The Bank of England is expected to raise its base interest rate from 3.75% to 4.00%, a move widely anticipated by economists and reflected in the shadow MPC’s six-to-three vote in favor. This decision comes amid concerns that energy price volatility may sustain inflation above 4% in the near term, despite earlier rate hikes. The fiscal environment remains challenging: income-tax thresholds remain frozen, meaning rising wages push more workers into higher tax brackets—potentially resulting in an effective marginal tax rate of 64% on savings interest for those earning between £100,000 and £125,140 from April 2027. Meanwhile, HMRC is reviewing the employment status of LLP members following a Supreme Court ruling, which may affect tax liabilities and corporate structures. The unresolved question centers on how these intersecting pressures—risin