Two in five service companies passed on costs to customers in March

As many as four in 10 service companies said they put up prices in March as they faced heavily rising energy and staffing costs.

A closely watched survey of businesses in the service sector, including restaurants and pubs, found 40% increased their average prices last month as only 3% cut them.

It pointed to the strongest price rises since the monthly survey began in the summer of 1996.

The results come from the S&P Global/CIPS UK services PMI survey, which measures the performance of companies in the service sector each month.

The survey returned a score of 62.6 in March, up from 60.5 in February, its highest point in 10 months.

It shows clear growth for the sector; any PMI score above 50 is positive.

Unsurprisingly, the removal of pandemic restrictions and the return of workers hunting for lunch spots led to a sharp increase in demand.

“UK economic growth continued to surge higher in March after an Omicron-induced slowdown at the turn of the year,” said Tim Moore, economics director at S&P Global.

“Service sector companies led the way as business activity expanded at the fastest pace since the post-lockdown recovery seen last May.

“There were widespread reports citing a boost to business and consumer spending from the rollback of pandemic restrictions.

“Survey respondents commented on stronger demand arising from the return to offices, alongside a resurgence in the travel, leisure and entertainment sectors.”

But, Mr Moore added, optimism for the near-term is the lowest it has been since October 2020.

The war in Ukraine and high inflation around the world have hit confidence levels.

“Service providers experienced the second-fastest rise in business expenses since this index began in 1996, driven by higher wages, energy bills and fuel prices,” Mr Moore said.

He added: “Many survey respondents commented that the full extent of the recent spike in their operating costs had yet to be passed on to customers.”

The S&P Global/CIPS UK composite PMI, which measures more of the economy, scored 60.9 in March, up from 59.9 in February.

The big rise in the service sector was somewhat offset by a significant drop for manufacturers.