LONDON (Reuters) – Britain’s dominant services sector lost steam in November, although not by as much as first feared, as a looming rise in employer taxes weighed on firms’ hiring plans, a survey showed on Wednesday.

The S&P Global UK Services Purchasing Managers Index stood at 50.8 last month, down from October’s 52.0 – the weakest since October 2023 and only slightly above 50 dividing line between growth and contraction.

Still, Wednesday’s PMI was higher than a preliminary “flash” reading of 50.0.

The survey showed employment in the services sector fell for a second month, although the pace of decline was less marked than in October.

Companies reported a sharp drop in business optimism, which S&P said reflected companies’ worries after finance minister Rachel Reeves announced a budget on Oct. 30 that included a sharp jump in social security contributions paid by employers alongside a 6.7% rise in the minimum wage.

“Worries about the impact of policies announced in the budget, in particular those pushing up employment costs, were widely reported as leading to a gloomier assessment of business investment prospects,” Tim Moore, economics director at S&P Global Market Intelligence, said.

S&P said the planned tax rises prompted survey respondents to put investment on hold and heightened fears about weaker demand. Some also noted concerns about broader inflationary pressures in the upcoming year.

Input costs rose at their fastest pace since April, largely due to higher wage costs, while prices charged increased at a faster pace too, the survey showed.

The Bank of England, which is expected to keep interest rates on hold at 4.75% this month, is keeping a close eye of services price growth. BoE Governor Andrew Bailey and other policymakers have said the central bank would take a gradual approach in reducing borrowing costs.

Services firms reported the weakest growth in new orders since June, S&P said, while output growth expectations were the lowest since December 2022.

The composite PMI – which combines the services data with last week’s downwardly revised manufacturing survey – fell to an 12-month low, slipping to 50.5 from October’s 51.8. The composite PMI was revised up from a flash reading of 49.9.

($1 = 0.7905 pounds)

(Reporting by Suban Abdulla; Editing by Christina Fincher)