Business activity in Britain's dominant services sector rose at a faster pace in December, but a survey of purchasing managers showed that cost pressures intensified at the end of 2017.
Softer rises in new work helped lessen the pressure on operating capacity, and also led to slower growth in the rate of employment in the services sectors, the survey found, but input cost rose at the highest rate since September.
Services purchasing manager index (PMI)
The headline services PMI rose to 54.2 in December, up from 53.8 in November, the 17th-consectutive month of higher levels of business activity.
Despite higher levels of consumer spending, service providers said that economic uncertainties related to Brexit continued to hold back commercial clients' willingness to spend at the end of 2017.
And while news business continued to increase, it did so at the slowest pace since August 2016.
Input price inflation reached its highest level since September, confounding forecasts by many - including the Bank of England - that cost pressures would moderate towards the end of the year.
Services providers noted a wide range of cost pressures, including higher fuel bills, transportation costs, utility bills and raw materials costs.
Nevertheless, business optimism picked up to a seven-month high, with nearly half the survey's respondents expecting business activity to continue strengthening in 2018.
Duncan Brock at the Chartered Institute of Procurement and Supply - co-authors of the report alongside IHS Markit - said: "Service providers retain an upbeat view of overall business prospects for the next 12 months.
"The direction of travel is expected to be slow and steady over the course of 2018, however, which fails to excite anyone looking for greater returns."
The pound was up 0.22% against the dollar to $1.3546, but was flat against the euro at €1.1248.
UK stocks, meanwhile, underperformed the rest of Europe, with the FTSE 100 climbing just 0.15% compared with Germany's Xetra Dax, up 1%.