U.K. services sector growth edged up slightly in September from August as domestic demand remained relatively subdued and new business growth eased to a 13-month low.
The IHS Markit/Chartered Institute of Procurement & Supply's seasonally-adjusted services PMI business activity index increased to 53.6 in September from an 11-month low of 53.2 in August.
Input cost inflation reached a seven-month high as rising operating expenses led to an increase in average prices charged by service sector firms. Service sector employment continued to rise in September, at a rate which eased only slightly from August's 19-month high.
Business confidence remained close to its weakest since the end of 2011. The net balance of survey respondents expecting a rise in business activity over the next 12 months fell to its lowest level since June.
The U.K.'s manufacturing sector expanded at a slower pace in September from August, and construction sector business activity posted a contraction during the month.
"The surveys therefore portray an economy struggling with the unwelcome combination of sluggish growth and rising prices, presenting a dilemma for policymakers," said Chris Williamson, chief business economist at IHS Markit.
The latest survey results will lower expectations that the Bank of England will increase interest rates soon, Williamson said.
"The waning of the all-sector PMI in September pushes the surveys slightly further into territory that would normally be associated with the central bank loosening rather than tightening policy," he said.