Services sector hits five-month high

5 January 2012

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5 January 2012 | Adam Leach

The UK services sector ended the year with a bang, as activity and new business wins both rose by the highest rate since July.

The Markit/CIPS UK Services PMI for December, out today, reported a five-month high of 54.0 for the month, indicating a solid improvement on November’s figure of 52.1 (a figure about 50 indicates growth). Respondents to the survey said the reason for the growth was down to greater levels of success in turning enquiries into business wins. Increased use of marketing to support growth was also reported.

However, despite the growth, respondents retained an air of caution with regard to future prospects as concern over the impact of government austerity measures and economic stability in Europe continued.

As a result, the level of business confidence in the sector dropped to the lowest level since September. The report also found that profit margins had been squeezed in December as companies offered discounts in order to generate new business.

David Noble, CIPS CEO, said: “December capped a year of reasonable growth for the UK services sector but significant risks still lurk under the surface, not least the outcome of ongoing efforts to shore up Eurozone economies. Companies exposed to the poorer performing manufacturing and construction industries in particular will need to watch out for the impact of these dangers.”

Chris Williamson, chief economist at Markit, said: “Uncertainty remains unusually high, and companies look to be hunkering down for a tough year in 2012. However, the upturn in services activity in December provides some encouraging news the UK economy is showing some resilience among the many headwinds that it is currently facing.”

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