Buoyant service industries spur faster UK growth hopes

The UK's powerhouse services sector – spanning hairdressers to accountants – is in its most upbeat mood since March 2010, putting the economy on course for faster growth.

Despite a January blip for the Chartered Institute of Purchasing & Supply's activity index, which eased from 58.8 to a seven-month low of 58.3, the survey remains firmly in growth territory.

Similar buoyant news from construction and manufacturers prompted experts to predict 0.8 per cent UK growth for the opening quarter of 2014 – faster than the 0.7 per cent in the final three months of last year.

The fortunes of the services sector – around three-quarters of economic output – have a huge influence on recovery prospects.

"Even with the easing seen in January, the sector is still expanding at a rate that bodes well for another strong GDP reading in the first quarter," said Chris Williamson, the chief economist at the survey's compiler Markit.

The survey comes after official estimates declared 2013 the best year for the economy since 2007.

Rob Wood, the chief UK economist at Berenberg, said January's slowdown was "no cause for worry" as growth picked up in the eurozone, which accounts for around 40 per cent of UK exports.

He added: "Monetary policy is getting traction, employment is booming, and the UK's main trading partner is moving further into expansionary territory."

Confidence is growing rapidly as firms plan to keep hiring and raise investment amid rising hopes for a sustained recovery – albeit increasing the chances that unemployment will fall to the Bank of England's 7 per cent threshold for considering potential rate rises.

Work backlogs are meanwhile rising at their fastest rate since May 1997, prompting firms to push up prices.

David Tinsley, an economist at BNP Paribas, said consumer price inflation could become a problem for the Bank later in the year.