Service sector bounceback ‘set to keep growth stable’

Britain’s dominant service sector saw a welcome rebound in activity last month, but optimism among firms hit a five-month low amid increasing anxiety over Brexit negotiations.

The closely watched Markit/CIPS services purchasing managers’ index (PMI) showed a reading of 54.3 in August. A reading above 50 indicates growth.

This was up from 53.5 in July, when activity expanded at its slowest pace since April due to the heatwave, the football World Cup and Brexit uncertainty.

It was also more than expected, with most economists pencilling in a reading of 53.9 for August.

The survey puts the economy on course for stable growth of 0.4% in the third quarter, according to survey compiler IHS Markit, but raises concerns over the outlook.

It found that business confidence for the year ahead dropped to its lowest since March, as firms fret over political uncertainty and the “unpredictable impact of Brexit on clients’ business operations”.

Chris Williamson, chief business economist at IHS Markit, said: “Faster service sector growth comes as much-needed welcome news after disappointing manufacturing and construction PMI surveys in August.

“The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.”

But Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), warned over “dark clouds of political indecision” hampering further service sector growth.

The survey saw all three sectors record sharp falls in business expectations for the year ahead, following downbeat manufacturing and construction PMIs earlier this week.