UK services PMI October 2026. Is now a good time for a service business to borrow?

UK service businesses had their best month since February in October 2026. The S&P Global UK Services PMI published on 4 November rose to 52.8, new work grew at the fastest pace since January, and firms took on staff for the first time in just over two years. Costs are rising too, and interest rates may be going up, so many owners of agencies, consultancies, IT firms, recruiters and transport businesses are asking the same thing. Is this a good time to borrow to grow? Here is what the survey shows, what it means for borrowing costs, and the funding that fits a service business. Smart Funding Solutions is a broker, not a lender. We compare whole of market options and arrange business finance from £10,000 to £20 million.

01What did the October 2026 services PMI show?

The headline index rose to 52.8 in October from 52.1 in September. Any reading above 50 means activity is growing, and the sector has now grown for four months in a row. The survey of around 650 service firms was collected between 12 and 28 October.

• Activity. The highest reading since February, though still below the long-run average of 54.2.
• New work. Up for a fourth month, at the fastest pace since January, driven by customers at home. Export sales fell slightly.
• Jobs. Staff numbers rose for the first time in just over two years, though only marginally.
• Costs. Input price inflation hit a five-month high, with around 38% of firms reporting higher costs.
• Confidence. Expectations for the year ahead rose to their highest since February.

Across the whole private sector, the composite output index rose to 52.9 from 52.0. Factories did well too, as our report on the October 2026 manufacturing PMI shows. For the wider picture, see whether the UK is in recession.

02Are service businesses hiring again?

Just about. October ended two years of falling staff numbers in the sector, but S&P Global said the rise was marginal. Some firms said cost pressures kept a freeze on hiring, and some cited AI adoption as a reason for not replacing staff who left. The jobs picture matches what recruiters reported in our post on the KPMG and REC Report on Jobs.

Wage bills are going up either way. The National Living Wage rises to £13.21 an hour from April 2027, up 3.9%, and the rate for 18 to 20 year olds rises to £11.27. For a people business, payroll is usually the biggest cost, so a new hire has to be funded for months before the extra work pays for itself. A business loan to pay wages or a working capital loan can cover that gap.

03Why are costs rising for service businesses?

Firms in the survey pointed to higher energy, fuel and transport costs, salaries and raw material prices. Input price inflation rose for the third month running. Businesses passed some of it on, and prices charged rose robustly, but a few said competition limited how much they could raise their fees.

Inflation is running well above target. The ONS consumer price inflation release showed CPI at 3.5% in September 2026, up from 3.1% in August. Our inflation report explains what is behind it, and transport firms will find more detail on fuel in our post on diesel prices and fuel duty.

04Will interest rates go up after the services PMI?

S&P Global said the October figures "underscore the near-certainty of a Bank of England rate hike in November". The Bank announces its decision at noon on Thursday 5 November, one of the four meetings each year that come with a full Monetary Policy Report, according to its 2026 meeting dates. Bank Rate has been 3.75% since the September decision.

A rise from 3.75% to 4% would add about £250 a year for every £100,000 of variable-rate borrowing that tracks Bank Rate. Fixed-rate loans already signed would not change. Our post on what a rise to 4% means for business loans shows which facilities move, and the business finance rate index shows typical rates by product.

05Is now a good time for a service business to borrow?

It can be, if the borrowing pays for something that earns more than it costs. The survey shows demand picking up, so a service firm turning work away for lack of staff, kit or cash has a reason to act. But rates are more likely to rise than fall in the short term, so it pays to borrow for a clear purpose and to compare the total cost, not just the monthly payment.

• Borrow against a plan. Lenders want to see what the money is for and how it will be repaid. A simple cash flow forecast helps.
• Check what you can afford. Our guide to how much your business can borrow and the business loan calculator show the likely repayment.
• Think about fixed or variable. If rates go up, a fixed rate protects your budget, while a variable rate may suit a short facility you plan to clear early. Compare the costs in our business loan interest rate guide.
• Know how lenders decide. Read how lenders assess applications before you apply.

06How can a service business fund growth and hiring?

Most service firms have few physical assets, so the right finance usually depends on how you get paid.

• You invoice clients. Invoice finance releases most of the value of unpaid invoices when you raise them, so growth does not stall while you wait 30 to 60 days. See how much invoice finance costs.
• You need a lump sum. Unsecured business loans fund hires, marketing or a new office over a fixed term.
• Your needs go up and down. A revolving credit facility lets you draw only what you need. Compare it with an overdraft in revolving credit facility vs overdraft.
• You need kit or vehicles. IT equipment finance and fleet finance spread the cost over the life of the asset.
• A bigger step. Growth finance and the Growth Guarantee Scheme support larger plans.

07Which service businesses can get finance?

Lenders fund service firms of every kind. These pages explain what each sector can borrow and how.

• Business services finance and consultancy business finance
• IT services finance and software company funding
• Recruitment finance for agencies paying temps weekly
• Marketing agency funding and design agency finance
• Transport and logistics finance and courier business finance
• Hospitality business loans for consumer facing services

08What does the services PMI mean for your funding?

Demand is improving, costs are rising and borrowing may get a little dearer. If you need finance for growth, hiring or a cost squeeze, it makes sense to line it up while your recent trading looks strong, and to compare offers across the market rather than taking the first one. If your bank has said no, our guide on what to do after a declined business loan explains the next step.

Use Instant Quotes to see which lenders could fit your business in minutes, or talk to a broker about the options.