by David Milliken

London (Reuters) – Business activity in Great Britain has increased at the slowest rate in September in September, companies and consumers who have postponed their significant spending decisions awaiting whether they would be affected by the tax increases provided for in the November budget, according to a survey published on Friday.

The final S&P Global Purchasing Managers’ index index index for the British services sector fell to 50.8 in September, against 54.2 in August, its lowest level since April and well below the initial estimate of 51.9.

The PMI Composite index – which includes a low figure for PMI Manufacturer index published on Wednesday – has also been revised downwards to reach its lowest level since April, at 50.1, barely above the 50 bar which separates the growth in the contraction.

“The acceleration of production growth this summer now resembles a straw fire, because high political and economic uncertainty has once again established itself as a constraint for the performance of the service sector,” said Tim Moore, economic director at S&P.

“Many participants in the survey said that client companies had postponed their investment decisions until after the fall budget, while households were also hesitating to make significant purchases,” he added.

The Minister of Finance, Rachel Reeves, must present her second annual budget on November 26 and many economists think that she will have to increase taxes or reduce spending by several tens of billions of pounds, a little more than a year after having presented the budget which provided the highest increase in taxes since 1993.

Companies were the hardest affected last year by increasing compulsory social security contributions that took effect in April.

S&P said its data showed that service companies had deleted jobs in each of the last 12 months, while business costs have increased more slowly than before.

“The signals of a weakening of the labor market and a decrease in inflationary pressures are likely to provide support for the more ‘Dovish’ evolution of the political debate to the Bank of England,” said Tim Moore.

BOE politicians are divided on the extent to which a probable temporary recovery in inflation, which could reach almost double its objective, should encourage them to be cautious about a new drop in rates, currently at 4%.

(David Millike, Mara Vîlcu for the , edited by Augustin Turpin)

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