Struggling service sector affects the UK economy

Sluggish growth in the UK’s service sector is likely to mean a further slowdown in the economy in the second quarter of 2016.

Responding to a new survey, around a third of firms in the crucial sector said that general uncertainty was taking its toll on business.

According to the research, which was completed by financial information firm Markit and the Chartered Institute of Procurement & Supply (CIPS), there was a slight increase in activity between April and May.

However, the rise is unlikely to have been as significant as many will have been hoping for.

Based on current trends it is expected that GDP will drop to 0.2 per cent in the three months to June, down from 0.4 per cent in the first quarter of the year.

Chris Williamson, chief economist at Markit, said: “Growth has collapsed in manufacturing and construction, leaving the economy dependent on the service sector to sustain the upturn, though even here the pace of expansion has remained frustratingly weak so far this year.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “Despite some improvement compared to April, this is still a pretty lacklustre survey that points to muted services activity.

“While the survey may help to alleviate fears that the UK economy could stagnate in the second quarter… it still looks likely that UK GDP growth will be no better than 0.3 per cent quarter-on-quarter in the second quarter, which would be the weakest performance since the fourth quarter of 2012.”