UK services sector growth avoids triple-dip recession

4 April 2013

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4 April 2013 | Anna Reynolds

Buyers in the services sector experienced the strongest growth in new work last month since August, helping the UK to narrowly avoid a triple dip recession.

The latest Markit/CIPS Services Purchasing Managers’ Index, published today, recorded a figure of 52.4, which was a stronger performance than February’s score of 51.8 – and the best reading for seven months.

Companies commented on greater market demand, with clients showing improved confidence and willingness to commit to new contracts. Growth in new business has now been recorded for three successive months.

UK service providers responded to rising sales levels by increasing staff numbers. Companies were able to keep on top of workloads, which was reflected by a reduction in outstanding work, for the sixth successive month. Operating costs continued to rise, particularly for fuel, food and utility prices, resulting in companies increasing their own charges to protect margins.

Recent new business wins meant 47 per cent of respondents were confident in continued growth in the sector, with confidence at a 10-month high.

CIPS CEO David Noble said: “These positive figures culminated in a decent first quarter for this critical sector, but growth at the present rate remains tepid and below the long-run average. However, there are signs that underlying trends are improving, even defying and limiting the effect of the bad weather on firms.”

Chris Williamson, chief economist at Markit, said: “The government and Bank of England will breathe sighs of relief in seeing signs of a gathering upturn in the services sector during March, which looks set to have helped the UK avoid a triple-dip recession by the narrowest of margins.

“Business activity grew in March at the fastest rate since the Olympics-related upturn seen last August, providing a much-needed boost to the economy in the first quarter after disappointing surveys for the smaller manufacturing and construction sectors.”

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