July downpours hit hotels and caterers

Hotels and restaurants bore the brunt of the downpours at the beginning of July as Britain's services firms struggled for momentum, the latest snapshot of the sector's fortunes revealed yesterday.

The Chartered Institute of Purchasing & Supply/Markit purchasing managers' index, where a score over 50 signals growth, fell from 51.3 to 51 last month.

This is the slowest pace for 19 months and shows the sector, accounting for three-quarters of the economy, not far above stagnation pace. Manufacturers and builders also struggled over the month in a worrying start to the third quarter.

By far the sharpest reduction was among hotels and caterers as respondents bemoaned the impact of the poor weather. IT and financial services firms suffered but transport firms fared better.

Cips' chief executive, David Noble, said that the strong bounceback expected following June's extra bank holiday had failed to arrive. "The operating environment remains as difficult as ever," he said. "Input prices continue to rise and competition is fierce, leading to reduced fees and pressure on margins. While the temporary influences may change, the broader economic environment remains downcast."

Confidence among British firms has been hit by the debt crisis in the eurozone, which accounts for 40 per cent of British exports.