WORRIES over Brexit and subdued consumer spending weighed on new business inflows for UK services companies in May, a survey signals.

The Chartered Institute of Procurement & Supply’s latest survey of UK services shows the sector’s growth accelerated modestly in May to its fastest pace in three months. CIPS’s headline business activity index for services rose from 52.8 in April to 54.0 last month on a seasonally adjusted basis, moving further above the 50 no-change mark to signal the fastest pace of expansion since February.

However, while there was a marginal acceleration in new business growth in May, with this index edging up from 52.9 in April to 53.1, CIPS highlighted the fact that the increase recorded last month was still one of the weakest since the summer of 2016.

It said: “Reports from survey respondents suggested that subdued consumer spending and Brexit-related concerns among large corporate clients had weighed on new business growth in May.”

CIPS added: “There were a number of reports that consumer spending remained relatively weak, particularly in relation to non-essential purchases. Some service sector firms also commented that Brexit-related concerns had led to delayed decision-making among large corporate clients.”

Employment growth in services in May was only slightly stronger than in April, when it was at its weakest in 13 months, the survey shows. Skills shortages and caution among firms on the recruitment front, against a backdrop of uncertainty, were highlighted as factors.

CIPS said: “Some panel members linked weaker job creation to more cautious staff hiring plans, partly reflecting heightened economic uncertainty.”

Services companies’ costs showed a sharp increase, reflecting higher fuel bills and rising pay. And firms’ confidence about their prospects for increased activity on a 12-month view fell for the third time in four months.

Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said the survey pointed to a “mixed and unconvincing” performance by the services sector.

While noting services growth was the fastest in three months, he added: “Tepid new business growth, reduced confidence and an increased squeeze on margins maintain concern about the outlook.”

Chris Williamson, chief business economist at survey compiler IHS Markit, noted CIPS’s reports on UK services, construction and manufacturing activity together pointed to growth of around 0.3% to 0.4% in the second quarter.

While ahead of UK expansion of 0.1% in the first quarter, the projected growth rate for the three months to June is weak by historical standards.

CIPS director Duncan Brock said: “It felt as though the sector was losing its lifeblood this month as Brexit worries continued to claw away at confidence, new orders and business margins. The survey revealed clients and consumers were reluctant to spend, with one of the lowest rises in new orders in the last two years, and, though overall activity increased, it was at a restrained pace.”