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Services sector growth bucks Brexit fears

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Britain’s services sector has defied fears of a Brexit slowdown, recording its fastest rate of growth in nearly 18 months today.

The latest purchasing managers’ index from Markit/CIPS shows a third consecutive month of growth, with the index rising from 55.2 in November to 56.2 in December where a value above 50 indicates growth and below 50 indicates slowdown.

New work drove an expansion in the services sector, the survey suggests, but output price inflation – what business charged – rose at the strongest rate since April 2011.

Markit chief business economist Chris Williamson said that the figures may suggest an upward movement in interest rates was now more likely than a cut, but that policy makers were unlikely to act in the short term and may still keep interest rates low over Brexit uncertainty.

Williamson says: “At face value, this improvement suggests that the next move by the Bank of England is more likely to be a rate hike than a cut, but policymakers are clearly concerned about the extent to which Brexit related uncertainty could slow growth this year. They will therefore consider the current resilience of the economy alongside the elevated levels of uncertainty highlighted by the historical weakness of business optimism about the year ahead. Any change in policy therefore looks unlikely in the short term, and the next move in policy could as much be a rate cut as a hike.”

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