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UK reports solid service sector growth

UK reports "solid" service sector growth

The UK services sector has seen "solid" growth over June as its counterpart in Europe begins to slow again, which means many overseas investors could carry out a to Britain.

Service sector monitor Markit reports that the purchasing managers' index (PMI) grew to 53.9 in June, compared to 53.8 in May, with a reading over 50 indicating an expansion of the service sector.

While the the latest results are better than forecasted, the long-term trend is downwards, with services growing 0.5 per cent in the second quarter of 2011 compared with 0.8 per cent the previous quarter.

According to Markit, job creation in the sector remained weak as the economy as a whole grew by just 0.3 per cent in the second quarter, down from 0.5 per cent during the previous three months.

While the growth in the service sector is promising, Markit chief economist Chris Williamson said that it wouldn't offset jobs lost in the public sector, with unemployment likely to stay "stubbornly" high.

"Companies kept headcounts largely unchanged," he commented, adding: "The scope for the private sector to make up for public sector layoffs therefore still looks limited."

Despite the overall downward trend in the service sector, its continued growth may help the UK hit its GDP targets as the industry accounts for 77 per cent of the economy.

Meanwhile, Markit reported that the Eurozone's service sector saw growth slump to an eight-month low this past June.

The region's PMI fell to 53.7 last month, from 56 in May, furthermore business confidence has slipped to its lowest level in two years.

France's growth slackened, while the service sector in Italy actually contracted and survey results showed that business confidence fell in Germany, France, Italy and the Irish Republic.

"Domestic demand continued to stymie services growth across the region's peripheral countries, reflecting a combination of economic uncertainty and deficit-reducing austerity measures," commented Mr Williamson.

He explained that the Eurozone was still reliant on France and Germany to drive growth, however, they may no longer be able to continue down that route as manufacturing growth slowed sharply in both countries.

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