The factories are still growing. The services that employ most of Britain just shrank at the fastest pace in three and a half years.

The June survey of Britain's services firms landed this morning, and it makes uncomfortable reading. The S&P Global/CIPS UK services PMI — a monthly poll of purchasing managers, where anything above 50 means the sector is growing and anything below means it is shrinking — came in at 48.8, down from 49.3 in May. That is two months of contraction in a row, and the steepest drop in activity since January 2023.

The tell is in what didn't fall. Manufacturing, surveyed on Wednesday, held up at 52.5 — still expanding. So this isn't a whole-economy stall; it is a services one. And services — finance, transport, hospitality, business support — are roughly four-fifths of the UK economy and the place most people actually work. The bit of Britain that makes things is steady. The bit that employs the country is going backwards.

Why? Firms told the survey that new work fell at the fastest pace in about three and a half years, blaming squeezed customer budgets, the fallout from the Middle East conflict, and — the line worth sitting with — uncertainty over who will replace Keir Starmer and what they will do on tax. Tim Moore of S&P Global called it "a clear loss of momentum for the UK economy during the second quarter." The leadership limbo isn't only a Westminster drama, then. It has turned up as a number in a business survey: companies holding off because they don't yet know the rules.

For the household, this reaches you through work before anything else. A services sector shrinking is one that hires less and, the survey notes, trims a little more — the same loosening jobs market you have watched all year, now seen from the employer's side of the desk. There is one piece of relief in the detail: the cost pressures firms face eased to their softest since March, the sort of thing that eventually feeds through to the prices you pay, though slowly and never in a straight line.

A word on today itself. New York is closed for Independence Day, so there is no live Wall Street steer and London trades thin and quiet. That makes this morning's home-grown survey the one real signal on the board — and its message is that Britain went into the summer with less momentum than it began the year, in the part of the economy that matters most to ordinary pay.