Services sector catches a cold

THE economy “iced up” last month as Britain’s powerhouse services sector suffered its slowest growth for 20 months amid snow disruption.

A much weaker than expected purchasing managers’ snapshot of services, which includes IT, hotels, restaurants and transport and makes up nearly 80 per cent of national output, suggests economic growth slowed to 0.3 per cent in the first quarter from 0.4 per cent over the previous three months.

But economists said this was unlikely to prevent Bank of England policymakers raising interest rates in May.

The IHS Markit/CIPS business activity index dropped from 54.5 in February to 51.7 – a reading above 50 denotes expansion – for its weakest performance since July 2016.

As well as heavy snow disrupting businesses and curbing consumer spending, the survey found evidence of “heightened economic uncertainty” and Brexitrelated concerns leading to companies delaying decisions.

Further evidence of the cold snap hitting spending emerged with today’s high street sales tracker from business adviser BDO, showing the second worst high street sales on record in March. Year-onyear sales fell 10.1 per cent, with fashion and homewares sales down 12.7 per cent and 13.2 per cent respectively.

BDO’s Sophie Michael said: “People couldn’t get to the shops, but weren’t spending online to make up the shortfall. While many have cited this to be due to consumers not trusting deliveries to get through, it’s also a clear indicator of the wavering underlying spending power.”

IHS Markit chief business economist Chris Williamson said: “The UK economy iced up in March, so first quarter economic growth will likely have been adversely affected. The latest dip is comparable to prior months in which the country saw heavy snow, so will probably do little to alter policymakers’ view on the underlying health of the economy.”