Fall in service sector orders fuels fear of double-dip recession

A slowdown in new orders across the services industry during September has cast further doubt over the strength of the UK recovery, according to the latest survey of the sector. Widespread uncertainty reported by service-sector firms, which account for about 70% of the economy, has choked off a small rise in employment and fuelled fears of a double-dip recession. The Markit/CIPS business activity index showed service-sector sales picked up from August's 16-month low, but companies reported that inflows of new business rose at a slow pace, undermining claims that the private sector was ready to employ many of the people made redundant in the public sector. After accounting for seasonal factors, the index registered 52.8. Although higher than August's low of 51.3 and above the 50.0 no-change mark for a 17th successive month, the rate of expansion signalled by the survey was only modest at a time when orders were expected to be gathering momentum. Growth through the third quarter as a whole was the weakest since the second quarter of 2009. Following a slowdown in construction industry activity and a decline in export orders during the same month, economists said the UK was struggling to emerge from the recession. Chris Williamson, chief economist at Markit, said: "Business activity rose at a faster rate than August, but the survey provided plenty of signs to suggest that this does not represent the start of a renewed upturn, and instead growth is set to remain subdued in the coming months. "Of greatest concern, new business growth slowed closer to stagnation and confidence for the year ahead remained at a level only reached at times of extreme stress. Unless trends in new business show an improvement soon, the lack of confidence is consistent with a downturn in business activity in the coming months." Williamson added: "Anecdotal evidence from the survey reveals that inflows of new work and prospects for the year ahead have been hit by widespread worries that the recovery is losing steam, cancelled government contracts and the prospect of more cuts to come, as well as uncertainty regarding the impact of October's comprehensive spending review."