UK service industry falls for the first time since April 2009

Activity within the UK service industry took a hit in December, as it fell for the first time in two years, raising fears of yet another recession.

The Markit/CIPS services Purchasing Managers' Index (PMI) for services, which makes up three-quarters of the UK economy, dropped to 48.9 in December - its lowest reading since April 2009 - from 50.2 in November.

Markit said the figures, combined with mixed manufacturing and construction figures earlier this week, mean the Britain posted its worst quarterly performance for three-and-a-half years, and suggest the economy contracted by 0.2pc in the last quarter of 2012.

Service sector firms reported a slide in new work in December amid budget constraints and a lack of confidence, which was the second back-to-back decrease in new work since mid 2009.

Bad weather was also thought to have been a factor behind the overall contraction in the services sector as Britain was hit by persistent rain.

Construction firms were likewise badly impacted by last month's heavy rainfall, with the PMI survey showing activity in the sector falling at its fastest rate for six months, dragged lower by a poor performance in the housebuilding sector.

Manufacturing was the only bright spot last month with activity surging to a 15-month high in December, according to surveys, but the sector only accounts for 10 per cent of the economy.

The survey does not cover the retail sector, but there is little confidence that consumer spending over Christmas was enough to offset woes in the services and construction sectors, given cost pressures on UK households.

For more information on UK service industry, see the latest research: UK Service Industry

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