Growth in Britain's service sector fell last month to its slowest since February, with business confidence reaching its lowest since the Iraq war two years ago, a survey showed today.
The Chartered Institute of Purchasing and Supply/NTC Research's index of service sector activity slipped to 55.1, far below the 56.0 forecast by analysts, from 56.5 in April.
A reading of 50.0 or above indicates expansion, while 50.0 and below signals contraction. This new blow to Britain’s economy follows a faster-than-expected contraction in Britain's manufacturing sector, revealed in a report on Wednesday.
Economists said the figures still suggested a relatively robust pace of services sector growth, but continuing decline would put pressure on the Bank of England to cut interest rates from 4.75 per cent by year-end.
"The expectations component has been falling and we expect it to continue to fall in the next few months," said Alan Clarke, UK economist at BNP Paribas.
"This is important for monetary policy makers and all adds up to an interest rate cut before the end of the year."
Confidence for the future dipped to 71.5 from 71.8 in April, its lowest since the start of the Iraq war in March 2003 and well below the readings above 80 at the start of 2004.