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U.K. Services Growth Slows Amid ‘Challenging’ Environment

March 5 (Bloomberg) -- A U.K. gauge of services fell more than economists forecast last month as sales growth slowed and some companies noted a “challenging” environment.

A gauge of services activity based on a survey of purchasing managers fell to 53.8 from 56 in January, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report today in London. The median forecast of 29 economists in a Bloomberg News survey was for a reading of 55 last month. A measure above 50 indicates expansion.

Reports by Markit last week showed manufacturing expanded for a second month in February while construction output rose at the fastest pace in 11 months. It said today that services industries continue to show “solid” growth and its three indexes indicate Britain’s economy will expand in the current quarter after a contraction in the last three months of 2011.

“Despite some loss of momentum in February, the services sector continued to grow at a robust pace, adding to signs that a double-dip recession will be avoided,” said Chris Williamson, chief economist at Markit. Recent data “suggest the economy will expand modestly in the first quarter.”

While sales growth was the weakest since November last month, employment rose for a third month and confidence among executives increased to the highest level in a year, according to the report.


Still, Williamson said job growth remains “disappointing” and firms are having to offer discounts to win new business, “providing reminders of how tough the business environment remains for many companies.”

London-based ITV Plc, the U.K.’s biggest commercial broadcaster, said on Feb. 29 that while 2011 sales and profit rose after it expanded services that rely less on advertising, it is “cautious about the economic outlook.”

In Europe today, a separate report showed services and manufacturing output shrank more than estimated in February as the euro-area economy struggled to rebound from a contraction in the fourth quarter. A composite index based on a survey of purchasing managers in both industries dropped to 49.3 from 50.4 in January, Markit said. That’s below an initial figure of 49.7 published on Feb. 22.

Bank of England policy makers will probably maintain their asset-purchase target at 325 billion pounds ($514 billion) this week after last month’s 50 billion-pound increase, according to all 45 economists in a Bloomberg News survey. The central bank will announce the decision at noon on March 8.

To contact the reporter on this story: Scott Hamilton in London at

To contact the editor responsible for this story: Craig Stirling at

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