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U.K. Services Grow ‘Modestly’ as Euro Crisis Curbs New Business

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Dec. 5 (Bloomberg) -- U.K. services expanded at a “modest” pace in November as new business growth slowed, according to a survey.

A gauge of services activity based on a survey of purchasing managers rose to 52.1 from 51.3 in October, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London. New business rose at the slowest pace this year, they said. A measure above 50 indicates expansion.

Bank of England Governor Mervyn King said last week the intensifying turmoil in Europe is characteristic of a systemic crisis. While the central bank will probably keep the target for its bond purchases at 275 billion pounds ($430 billion) this week, some policy makers have said more stimulus may be needed.

“Companies remained concerned about the outlook,” Markit Chief Economist Chris Williamson said in the report. “Strong headwinds from the continued euro-zone crisis combined with public sector pressures are adding to the anxiety levels.”

The pound remained higher against the dollar after the report, and traded at $1.5637 as of 9.44 a.m. in London, up 0.3 percent on the day.

A separate report from Markit last week showed that manufacturing shrank for a second month in November, while growth in construction slowed. Markit said the services and manufacturing reports indicate the economy will stagnate in the current quarter.

Job Cuts

“There was evidence from the survey panel that the business climate remained tough, with the European debt crisis undermining confidence,” Markit said. It also reported that employment in services fell in November for the fourth time in the past five months.

Surrey, England-based Michael Page International Plc, a recruiting company that operates in the U.K., Europe, Asia and the Americas, said today profit growth slowed in October and November compared with the third quarter as the crisis in Europe “reduced client and candidate confidence levels.”

King said at a press conference last week that banks need to bolster their defenses against the debt turmoil. European leaders meeting this week are trying to safeguard banks amid concern the 17-nation euro area is on the brink of unraveling.

“An erosion of confidence, lower asset prices and tighter credit conditions are further damaging the prospects for economic activity and will affect the ability of companies, households and governments to repay their debts,” threatening banks’ balance sheets, King said. “This spiral is characteristic of a systemic crisis.”

All 39 economists in a Bloomberg News survey forecast the Bank of England will hold its bond-plan at 275 billion pounds at its Dec. 8 policy decision. All 52 economists in a separate poll say the bank will keep the benchmark interest rate at a record low of 0.5 percent.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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