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Concerns grow as services sector hits low in UK survey


Growth in Britain's powerhouse services sector slowed to a two-and-a-half year low last month, highlighting fears that the recovery is losing steam.

The closely-watched CIPS/Markit purchasing managers' index (PMI) survey - in which 50 separates growth from contraction - showed a lower-than-expected reading of 53.3 in September.

This was down from 55.6 in August, and is the weakest rate of growth since April 2013, with firms citing a slower rate of consumer spending and renewed global uncertainty sparked by the slowdown in China as factors.

It was the third month in a row the survey reported slowing services, posting a third quarter reading of 55.4, the lowest since the second quarter of 2013.

Business expectations of longer term growth in the sector sank to the weakest level since August 2014. The services sector accounts for around 75% of the economy.

Markit chief economist Chris Williamson said the data suggested "that the economy sank further into a soft patch at the end of the third quarter".

He added the report indicated that gross domestic product (GDP) growth slowed to 0.5% in the third quarter, but that the economy is entering the fourth at a pace down to just 0.3%.

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The wider economy bounced back from a slower start to 2015 with growth of 0.7% in the second quarter, according to official estimates.

Mr Williamson said: "Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular.

"There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels."

David Noble, group chief executive at the Chartered Institute of Procurement & Supply, added: "It appears that when China sneezes, the world catches a cold as some companies cited the region as a cause for worldwide concern."

Signs of a slowing UK economy will worry both Chancellor George Osborne and the Bank of England as its Monetary Policy Committee meets to set interest rates on Thursday.

IHS Global Insight chief UK and European economist Howard Archer said: "This is undeniably a disappointing survey all round."