Upbeat UK services set for strong 2014

Corporate Britain is ready to start 2014 with a bang as confidence hits a four-year high among the nation's all-important services firm.

The Chartered Institute of Purchasing & Supply says the services sector — ranging from accounting and IT to hotels and restaurants — was in its most upbeat mood since March 2010 last month, heralding a strengthening economic recovery this year.

It comes after Deloitte’s latest snapshot of sentiment in the nation’s boardrooms showed the share of finance chiefs now willing to take risk onto their balance sheets is now the highest in the six-year history of the survey. The EEF manufacturers’ organisation also showed 70 per cent of top manufacturing bosses believe the economy will improve this year.

The Cips survey — where a score over 50 signals growth — eased slightly from 60 to a six-month low of 58.8 in December, albeit still consistent with healthy expansion.

But new orders remain “reassuringly robust”, firms are taking on staff and the average growth rate over the last quarter for the biggest slice of the UK economy is the strongest in the survey’s 20-year history.

Combined with buoyant survey data from construction and manufacturing firms, it puts the wider economy on course for 1 per cent growth in the final quarter of 2013, according to Chris Williamson, chief economist of survey compiler Markit.

Rob Wood, chief UK economist at Berenberg Bank, said: “Firms’ confidence had been the missing ingredient in the surveys. They had been recording very strong output growth, rising productivity, but worries that it would not continue.

The expectations balance from the services purchasing manager index has given a good leading read on growth over the past few years, so the jump this month is potentially the most important information in today’s release.”

The Cips survey showed the healthiest conditions among computing and and IT firms, transport and communications and financial services, although consumer-facing businesses made slower progress as wages still lag the cost of living.

Respondents also noted pressure from rising energy, fuel and utility bills and commented on rising average wages, which Bank of England rate-setters will keep an eye on.

In Europe, Markit’s upbeat survey of private manufacturing and services firms also put the eurozone on track for faster growth in the current quarter.