UK service sector continues strong expansion

Gurjit Degun
4 December 2013

Activity and new business in the UK service sector are continuing to rise at “historically sharp rates”.

The seasonally adjusted Markit/CIPS UK service Business Activity Index for the services sector recorded a level of 60 in November, against the baseline of 50 which indicates no movement. Although this is a five-month low, and down from October’s multi-year high of 62.5, the index again signalled a “historically sharp rate of growth”.

Almost 28 per cent of respondents indicated a rise in activity, and growth has been recorded continuously through 2013 to date.

November also saw a sharp increase in new business, underpinned by promotional activities and a pick up in the housing market. But this placed further pressure on company capacity levels. Backlogs of work increased for the eighth successive month and at a historically steep pace.

Companies said they took on extra staff to help with the workloads, and a number of respondents said that workers were recruited in line with positive expectations for activity and demand.

Business confidence strengthened slightly during November, but remained below its long-run average. Investment levels are forecast to increase, while firms also anticipate taking on more staff, launching new products and expanding into new territories. Around 10 per cent of panelists responded to higher input prices by raising their own charges.

Chief economist at Markit Chris Williamson said: “Further buoyant growth of the services economy hands the chancellor a further piece of good news ahead of the autumn statement.

“There’s also scope for growth to pick up again in December. Measured across all three sectors, inflows of new business hit a record high in November, with demand surging from both consumer and corporate customers.”

CIPS group CEO David Noble added: “Notably, price and supply chain pressures will be something to watch in the coming months but for now, we can be merry that services will continue to deliver growth heading into the festive period.”

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