Strong services keep UK in top spot in Europe

GROWTH in Britain’s service industries slowed slightly during December, but a major survey of firms suggests that the UK economy is still expanding at the fastest pace in western Europe.

In Markit’s latest purchasing managers’ index (PMI), the UK’s headline figure dropped to 58.8, still well above the neutral 50 mark.

Combined with earlier surveys for construction and manufacturing, the UK’s composite score for the whole economy sits at 59.5.

Only Ireland’s service sector came close to outstripping the UK, with a PMI score of 58.6. The survey of German firms also indicated a robust expansion, with a figure of 55.

“The latest figures, which came in just shy of those seen in November, were punctuated with a number of positive signals for the UK economic outlook. They suggest that businesses are feeling particularly upbeat about 2014. With a growing backlog of orders, companies appear increasingly willing to take the plunge with new commitments in terms of both new investment and employment,” said Carl Astorri, senior economic adviser to EY’s Item Club

Spain’s headline PMI figure saw the strongest improvement in the series, reaching levels last seen before the financial crisis. The Spanish economy posted a reading of 53.9, the best in nearly six and a half years.

In comparison, France’s composite PMI was the worst for seven months, coming in at only 47.3, and strengthening suggestions that the struggling economy is already contracting again, for the third time since the financial crisis.

And although overall the jobs market is stabilising, this masks major differences between different countries: German and Irish companies say employment is rising, while Spanish, Italian and French businesses still say they are shedding staff.

Meanwhile EY slashed its forecasts for bank lending to firms in the Eurozone. Its analysts expect credit growth of just 1.6 per cent this year, down from the 3.8 per cent growth forecast in October.