Stumble in services sector
Feb 6 2003 By Peter Jackson, The Journal
Britain's services sector grew at its weakest pace in nearly a year last month after business was hurt by worries about the economic situation and potential war, a new survey has revealed.
But sectoral observers in the North-East believe the region is doing better than the rest of the UK.
The Chartered Institute of Purchasing and Supply's (CIPS) monthly index recorded a measure of 52.3 in January, compared with 53.2 the previous month, and the lowest level since February 2002.
A reading above 50 on the index shows growth, while anything below indicates contraction.
CIPS said the fall principally reflected slower growth in new business and a "sharp contraction" in levels of uncompleted work in hand.
It said depressed business confidence and "general uncertainty regarding the near-term economic and geo-political outlook" were widely blamed as the principal factor for a slowing in new business.
Roy Ayliffe, director of professional practice at CIPS, said: "In January, business activity in the services sector continued the trend of slowing growth experienced after last October's high.
"Companies in the service industry faced increased competition in January as uncertainty over the future economic situation deepened.
"Purchasing managers battled to protect their margins as, once again, input prices rose faster than output charges."
John Butler, UK economist at HSBC, said: "Similar to the performance this time last year, the UK economy appears to have finished 2002 and started 2003 on a soft note ...
"This near-on one point drop in the index appears to have reflected a sharp drop in business expectations, which itself may be influenced by fears about a war."
But the North-East's service organisation Service Network believes the regional picture is better.
Executive director Tracy Bransby said: "We are not unduly worried by these figures. Our own research in the North-East indicates that the business service sector is not only growing year on year, but that it represents an increasingly significant activity within the region.
"Feedback from our members actually points towards growth, not decline."
Nevertheless, the report will increase the pressure on the Bank of England's Monetary Policy Committee (MPC) to lower interest rates from the current 4pc.
The Bank started its February rate-setting meeting yesterday and will announce the decision today at midday.
Economists are widely expecting the rates to remain on hold.
Mr Butler said: "This lends some support for the doves but it is still, in our mind, extremely unlikely that the MPC will cut rates in the forthcoming months."
