Fears for UK economic recovery as slowing job growth puts more pressure on the service sector

Billy Ehrenberg
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The service sector accounts for 75 per cent of the UK's economic activity (Source: Getty)

Not great news for the UK's jobs market: research from REC and KPMG has revealed that the rate of hiring had slowed to a four-month low, with the bullish service sector carrying the majority of the load.

The data comes just two days after a report showed growth in the UK’s service sector slowed at the fastest rate in four years, raising more fears about the recovery. The services sector is vital to the UK’s economy, representing around 75 per cent of economic activity. The latest unemployment figures from the ONS showed the jobless rate has hit another post-crisis low: it was at 5.5 per cent in May.

The data shows companies are still hiring more than they wore a month ago, but the rate of increase has slowed in permanent jobs. This was accompanied by a slowing in the growth of vacancies too – this time to the slowest rate this year. With fewer permanent slots on offer, the number of temporary and contract posts rose.

The service sector is outpacing other industries, according to Bernard Brown, a partner at KPMG:

Growth in the services sector continued to outpace that of Britain’s heavy industries, with the former seeing a significantly stronger appetite for new hires to keep up with the volume of new orders coming in. These statistics will add more weight to the fears that the economy is not rebalancing as hoped, and are a worrying reminder of the recovery’s reliance on the performance of the white collar service sector.

While elements of the private sector are thriving, the public sector continues to suffer, with pay growth rising by just 0.2 per cent in the last reported quarter. This stagnation is in stark contrast with the pay awards seen in Britain’s businesses, whose staff saw average rises of 2.4 per cent, driven by the booming service sector. With the Government’s continued focus on austerity, this imbalance is unlikely to be readdressed in the near future.

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