UK Growth Picks Up Pace At Start Of Year

Britain's dominant services sector grew more quickly than expected last month suggesting that the UK economy picked up speed at the start of 2016, new figures show.

The UK recovery lost some of its momentum last year with the last quarter of 2015 seeing gross domestic product (GDP) expanding by 0.5%.

But early data suggests the economy is on course for 0.6% growth in the current period - despite fears over a global slowdown that have created turmoil on world stock markets.

However, the Markit (NasdaqGS: MRKT - news) /CIPS services purchasing managers' index (PMI) also showed firms in the sector - which ranges from legal firms to restaurants and represents more than three-quarters of output - are concerned about risks ahead including the referendum on European Union membership.

The reading edged up in January to 55.6 - where a reading of 50 separates growth from contraction. It (Other OTC: ITGL - news) had been 55.5 in December and had been expected to slip back to 55.3.

It comes after a reading from the smaller manufacturing sector earlier this week also showed stronger than expected growth last month.

The positive signs are in contrast to the gloomy outlook signalled by Bank of England governor Mark Carney recently, suggesting an interest rate hike remains a long way off.

The latest PMI data comes a day ahead of the Bank's Inflation Report, which will be closely watched for further clues for the thinking of the rate-setting Monetary Policy Committee (MPC (KOSDAQ: 050540.KQ - news) ).

Chris Williamson, chief economist at Markit, which compiles the survey, said "cracks continue to appear in the country's resilience to the various headwinds".

Order book backlogs fell at the fastest rate for almost three years and the mood among businesses in the services sector was its weakest since 2013.

The survey showed companies were worried about China's economic slowdown, financial market jitters, higher interest rates in the United States, more austerity at home and the possibility of a 'Brexit' from the European Union.

Vicky Redwood, chief UK economist at Capital Economics, said the survey "provides further evidence that the economic recovery has started 2016 on a slightly stronger note".

"But firms have become a bit more wary about the near-term outlook, which could in turn reinforce the MPC's caution about when to start raising interest rates," she added.