The economic recovery slowed at the start of the second half as government spending cuts hit business, with the Markit/CIPS UK services purchasing managers' index (PMI) showing that the services sector — which includes hotels and restaurants — grew at its weakest pace for a year in July. As demand for new work stalled amid uncertainty over the economic and spending outlook, the headline index dropped to 53.1 in July – the lowest since June 2009. With the bulk of government cuts still to come, businesses are already reporting the impact from cancelled public sector contracts. Paul Smith, senior economist at Markit, said: “The service sector provided a major boost to GDP in the second quarter, but the rate of expansion has slowed sharply in recent months, suggesting a far weaker contribution to economic growth in the second half of the year. "Disappointingly, the survey also shows that service providers are cutting payroll numbers, suggesting that private sector employers are unlikely to compensate for public sector staffing cutbacks and therefore implying that unemployment may begin to rise again.”

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