Slowdown in growth of services as orders hit

L Odds on further rate rise soften after latest data

Growth in Britain’s linchpin services sector slowed to a 16-month low in January, spotlighting the contrast in prospects between the wider UK economy and growing global demand in 2018.

The IHS Markit/cips purchasing managers index (PMI) out yesterday hit 53 last month, down from 54.2 in December – any figure above 50 denoting growth.

“January data pointed to a slowdown in growth of services activity across the UK, which stemmed from relatively weak gains in new work”, the survey said.

“Growth was reportedly curtailed by the loss of existing clients and lingering concerns surrounding the UK’S exit from the EU.”

Combined with last week’s weaker-than-expected surveys for the manufacturing and construction sectors, it suggested the UK economy was growing at its slowest pace since immediately after the Brexit vote in the summer of 2016.

The headline reading for January was at the bottom end of a range of forecasts in a Reuters poll of City economists. The report added that although new work in services came in faster in December, it was below the average for 2017.

Price pressures remained “elevated”, but showed the smallest rise in 16 months, IHS Markit said.

The latest picture of the services sector – which includes finance and related professional industries, hotels, restaurants, pubs and IT – will also be seen as weakening the case for another early rise in interest rates by the Bank of England (BOE).

Base rates were raised by the Bank last November for the first time in ten years. But Chris Williams, chief business economist at IHS Markit, said: “The January slowdown pushes the all-sector PMI into dovish territory as far as the BOE monetary policy committee (MPC) is concerned.

“With the survey also indicating weaker upward price pressures, the data therefore casts doubts on any imminent rise in interest rates.”

Williams added that in services there had been a “marked waning in demand” for business and consumer-facing businesses such as hotels and restaurants.

In addition, demand for transport and communications services was down for the second successive month. l Figures from the British Retail Consortium and KPMG showed like-for-like retail sales rose 0.6 per cent in January, compared with a fall of 0.6 per cent for January 2017. Social Investment Scotland (SIS) and Weber Shandwick have joined the organisations working with Converge Challenge 2018 to support the next generation of social entrepreneurs. Social enterprise-focused investment provider SIS, in partnership with PR firm Weber Shandwick, are providing a prize of £20,000 cash and in-kind business support such as workshops. Pictured from left are Converge Challenge alumni Dave Hughes, Debbie Wake and Rotimi Alabi.