Belfast Telegraph

Services sector activity picks up

By Jamie Grierson

The UK's powerhouse services sector grew at a faster pace than expected last month but economists warned the performance was only a temporary reprieve from the gloomy outlook.

The Markit/CIPS Purchasing Managers' Index (PMI), where a reading above 50 indicates growth, showed services activity rose to 52.1 in November from 51.3 the previous month.

But the survey revealed that employment in the services sector, which makes up 75% of the total economy, fell at its fastest pace for 15 months and new business grew at its slowest rate of the year so far.

Samuel Tombs, UK economist at Capital Economics, said: "The modest improvement in the UK CIPS/Markit report on services in November does not alter the big picture that the overall economy is verging on recession."

The survey follows mixed PMI data for the manufacturing and construction sectors in November, which showed a decline and modest growth respectively.

The UK economy grew at a better-than-expected 0.5% in the third quarter but analysts warned that this misrepresented underlying weaknesses and the prospect of a contraction in the final three months of the year was likely.

The economic picture has worsened in recent weeks as a number of bodies, including the Bank of England and Office for Budget Responsibility, downgraded their forecasts for the UK recovery and the eurozone debt crisis deepened. Chris Williamson, chief economist at Markit, said: "Whether or not the economy slides into recession next year depends to a large extent on whether politicians can find a workable solution to the eurozone's crisis.

"Until then, uncertainty is likely to prevail, which is damaging to both business and consumer confidence and raises the risk of the UK sliding back into a new downturn in the first quarter."

The survey said the higher activity in November reflected rising volumes of incoming new work and increased marketing and advertising.

The job cuts in the sector were blamed by those firms affected on a lack of new business, while business confidence was slightly down on October.