Business

UK service sector growth 'solid' in December, survey suggests

A picture shows the interior of the 'The Convenience', a former public toilet that has been converted into a coffee shop in Hackney, east London Image copyright Getty Images

Growth in the dominant UK service sector fell slightly in December, but remained "solid", a closely watched survey has suggested.

The latest Markit/CIPS service sector purchasing managers' index (PMI) fell to 55.5 from 59.9 in November, but was still above average.

A figure above 50 indicates growth in the sector.

However, the firm warned that there were still "significant" risks to the UK economy.

UK growth had "stabilised at a solid pace" supported by "a further strong increase in new business", the firm said.

Chris Williamson, chief economist at Markit, said: "The services sector remained the key driver of the UK's economic upturn in December, helping to offset the recent weakness seen in manufacturing and putting the economy on the starting block for another year of 2 to 2.5% growth in 2016."

The economy now appears to have grown by 0.5% in the fourth quarter, Markit said, down from its estimate last month of 0.6%.

UK manufacturing grew at its slowest pace for three months in December, a Markit survey indicated on Monday.

However, UK construction growth rebounded in December after stronger commercial building activity, the firm said on Tuesday.

Mr Williamson said that "significant downside risks" remain in the UK economy in 2016, including "the cost impact of the Living Wage, government spending cuts, a potential hike in interest rates, global economic growth jitters and... Brexit [the risk of a UK exit from the EU]."

He said the pace of hiring had already slowed in the services sector "in what might be seen as a warning shot to those taking a complacent view of economic prospects for the coming year".

The sector had the slowest pace of job creation for five months in December, Markit said, and long-term expectations for business activity were the weakest since 2013.

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