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Services sector picks up in October as outlook for firms hits year-high

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  Published in Business and Finance on Wednesday, November 5th 2025 at 6:46 GMT by The Irish News

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Services Sector Rebounds in October, Firm Outlook Hits Year‑High

The United Kingdom’s services industry – the largest component of the nation’s economy, accounting for roughly 75 % of gross domestic product – has shown a marked uptick in performance during October. A report released by the Irish News, drawing on data from the Office for National Statistics (ONS) monthly business survey, shows that the sector’s confidence and output indices have surged to the highest levels recorded in the past year, signalling growing optimism among firms and a strengthening recovery from the pandemic‑era downturn.

Key Takeaways

The SSCI and SSOI, calculated by the ONS as part of its monthly business survey, measure the proportion of services firms that expect their overall business to grow, stay the same, or decline over the next twelve months. Both indices reached levels not seen since mid‑2023, reflecting an increasing number of businesses that view the economic environment as favourable. In particular, the “growth” response rose from 58 % to 60 %, while the “steady” and “decline” responses fell accordingly.

What Drives the Upswing?

The improvement in the services sector can be traced to several converging factors:

1. Consumer Spending Resurgence
   Retail, hospitality, and leisure subsectors – which had suffered steep contractions during successive lockdowns – have recorded a rebound in footfall and sales. According to the ONS, retail sales growth in October was 3.5 % year‑on‑year, while hospitality revenue rose by 4.1 %. Increased discretionary spending, aided by the easing of COVID‑related restrictions, has fed into a broader confidence boost across the sector.

2. Business Investment
   The ONS’s “Business Investment Survey” shows that firms in the services domain are planning to invest in technology, staff training, and expansion projects. Investment in information technology and communication services, which represent a growing share of the services economy, increased by 5 % in the first half of 2024.

3. Monetary Policy Environment
   The Bank of England’s recent decision to hold the Bank Rate steady at 4.75 % has helped keep borrowing costs manageable for service‑sector firms. Lower financing costs have encouraged companies to pursue growth initiatives, particularly in the digital and professional services sub‑sectors.

4. Supply Chain Stability
   A return to near‑normal supply chain flows has removed bottlenecks that previously constrained service delivery, especially in construction, professional services, and logistics. This has helped firms maintain and even increase their client base.

Sub‑Sector Highlights

• Finance & Insurance
  The finance sector remains the most resilient sub‑sector, with a 4.2 % rise in revenues, propelled by a surge in mortgage and investment products as the housing market stabilises.

• Professional Services
  Accounting, legal, and consulting firms reported a 3.8 % increase in turnover. The rise in demand for regulatory compliance and digital transformation consulting is a key driver.

• Travel & Tourism
  While still below pre‑pandemic levels, the travel industry showed a 2.5 % uptick in domestic bookings and a 1.8 % increase in international outbound tourism.

• Retail
  Online retail saw a 6.1 % growth, whereas physical stores grew at a slower 1.2 %. Nevertheless, the combined retail output rose by 3.5 %, underscoring the sector’s gradual recovery.

Forward Outlook

The ONS forecasts that the services sector will continue its upward trajectory through the rest of 2024. In its latest “Business Outlook for the Services Sector” bulletin, the ONS projects a 1.8 % growth rate for 2024, up from 1.4 % for 2023. The survey also indicates a steady rise in the percentage of firms expecting a rise in customer demand, suggesting that businesses are anticipating further expansion in the coming year.

The Irish News article further notes that the UK’s services sector, while still the largest part of the economy, is facing emerging challenges. Rising inflation, the cost of living crisis, and potential geopolitical tensions could dampen consumer spending in the medium term. Nonetheless, the current data paints a positive picture, with a robust increase in confidence that is likely to underpin future growth.

Contextualising with ONS Data

The ONS monthly business survey, which feeds both the SSCI and SSOI, is conducted every month across a representative sample of UK businesses. The methodology involves a mix of telephone and online interviews, targeting firms across all sectors. The services sector is sampled separately, with a focus on firms that operate primarily in the non‑manufacturing domain. The survey is widely regarded as a leading indicator of economic health, often used by policymakers and analysts to gauge short‑term business sentiment.

Conclusion

October’s data suggest that the UK’s services industry is not only rebounding but also gaining momentum, with a firm outlook that surpasses any seen in the previous year. The combination of stronger consumer demand, prudent investment, and favourable monetary conditions has created a conducive environment for growth. While challenges remain on the horizon, the current trajectory indicates that the services sector will continue to be the engine of the UK’s economic recovery.