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Recovery hopes rise on Britain's services surge

January 06, 2010 | "Times Online"

Britain’s hopes of emerging from the longest recession in history were raised today after the services sector, the “engine room of the economy” was boosted by the strongest growth in new business since September 2007.

The CIPS/Market Services Purchasing Managers’ Index rose from 56.6 to 56.8, with strong gains of new business making up for a dip in outstanding business.

David Noble, the chief executive of the Chartered Institute of Purchasing and Supply (CIPS), said: “Last year saw the UK service sector recover at an extraordinary rate and end 2009 on a high. This was on the back of stronger economic activity, new business wins — especially among larger companies — and growing client confidence.

“As the biggest contributor to the UK economy, services is undoubtedly heralding the way for wider economic growth in 2010.”

The data is released as the Bank of England's Monetary Policy Committee begins its two-day interest rate meeting, when it is expected to hold borrowing costs at a record low of 0.5 per cent and continue with its quantitative easing programme to pump £200 billion into the economy.

Howard Archer, chief UK and European economist at IHS Global Insight said: "The improvement in services sector activity in December reinforces belief that the Bank of England's Monetary Policy Committee will sit tight on both interest rates and quantitative easing on Thursday.

"Indeed, we suspect that the Bank of England will not extend quantitative easing further unless the economy suffers a serious relapse over the coming months. However, any tightening of monetary policy still looks a long way off."

Marcus Leroux

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