The “Service Sector” Villain: Why Your Haircut and Gym Membership Are Still Getting More Expensive

In the story of the UK economy, the villain used to be energy prices. Now, it is the service sector. The Bank of England’s split vote was largely driven by the refusal of service prices to fall. While the rate cut to 3.75% helps with mortgages, it does nothing to stop the rising cost of gym memberships, haircuts, insurance, and streaming services.
This sector is labor-intensive. When the plumber, the personal trainer, or the lawyer demands a wage rise to cope with the cost of living, that cost is passed directly to you. With wage growth at 3.5%, service inflation is “sticky.”
The dissenting hawks argue that cutting rates tells these service providers that it’s “business as usual,” allowing them to keep hiking prices. They wanted to keep rates high to squeeze demand, forcing these businesses to cut prices to survive.
For the consumer, this leads to a feeling of “inflation fatigue.” Even if the headline rate is 3.2%, the things we buy frequently (services) feel like they are rising much faster. The rate cut doesn’t fix this. It might even make it worse by putting more money in people’s pockets to spend on these expensive services.
Until the service sector cools down, the cost of living crisis isn’t over—it has just changed its disguise. The Bank is gambling that the recession will cool it down, but for now, the villain is still at large.