World Economy

UK Service Sector Sluggish

UK Service Sector SluggishUK Service Sector Sluggish

UK service sector growth remained sluggish in March as global economic uncertainty and worries about the upcoming EU membership referendum undermined business expectations.

The Markit/CIPS UK services purchasing managers’ index rose to 53.7 from February’s 35-month low of 52.7, but fell short of expectations for a reading of 54.0, ShareCast News reported.

The index remained below its long-run average of 55.2 and the average for the first quarter of 2016 of 54.0 was the lowest of any quarter since Q1 2013, Markit said.

Markit’s chief economist, Chris Williamson, said: “Business confidence remains in the doldrums as concerns about the global economy continue to be exacerbated by uncertainty at home, with nerves unsettled by issues such as Brexit and the prospect of further government spending cuts announced in the budget.

“It therefore seems unlikely that March’s upturn in the pace of growth represents the start of a longer term upswing. In contrast, the survey data suggest growth is more likely to weaken further in the second quarter. With the PMI already in territory traditionally associated with the Bank of England choosing to loosen policy, interest rate hikes seem a long way off.”

Combined with sub-par readings for manufacturing and construction, Markit said its service PMI pointed to a fall in quarterly economic growth in the first three months of 2016 to 0.4%, from 0.6% in the final three months of 2015.

Britain’s economy grew 2.3% last year. Government forecasters expect growth to slow to 2% in 2016.

Britain will hold a referendum on whether to leave the EU on June 23. A poll of businesses on Monday showed the possibility of a vote in favor of leaving is causing companies to put investment plans on hold.

Alan Clarke, an economist at Scotiabank, said he expected uncertainty surrounding the June 23 referendum to continue to weigh on UK output.

“While a weaker pound caused by EU referendum jitters should be a good source of support for growth, the uncertainty associated with Brexit is undermining that support,” he said. “Expect more of the same over the next few months.”

Support for Britain to stay in the European Union rose in the last month, suggesting a crisis in the steel industry and attacks in Brussels have not boosted the campaign for an exit, according to an ORB poll for the Daily Telegraph.

The survey published on Tuesday found 51% of Britons backed remaining in the 28-member EU with 44% in favor of leaving, with 5% undecided.