Economy Near Stalling Amid Services Slump

There is growing evidence that UK economic growth is stalling in the run-up to the EU referendum following the publication of closely watched activity surveys.

The Markit/CIPS purchasing managers' index (PMI) for the service sector released on Thursday recorded a worse-than-expected reading of 52.3 - down from 53.7 in March.

A reading below 50 indicates contraction.

The April figure was the lowest since February 2013, the survey's authors said, with business activity at a 38-month low and employment rising at its slowest pace since August 2013.

The readings for output in the other two major constituents of the UK economy earlier this week also failed to meet the expectations of economists.

They reported the steepest decline in manufacturing for three years with output going into reverse while growth in the construction sector slowed further.

Chris Williamson, chief economist at Markit (NasdaqGS: MRKT - news) , said the three PMI surveys pointed to a "triple-whammy" of disappointing news for the UK at a time of lower forecasts for the world economy.

He said of the UK service sector: "Some of the slowdown may be attributable to the early timing of Easter, though April also saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand linked to global growth jitters ".

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he did not expect the Bank of England's monetary policy committee (MPC (KOSDAQ: 050540.KQ - news) ) to react to an economic slowdown with an interest rate cut.

He said: "The MPC ... has emphasised that it will place less emphasis on the economic data in the run-up to the referendum than usual, and it will be wary of adding extra fuel to the increasingly rapid recovery in borrowing."