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UK services continue post-Brexit recovery but uncertainty remains

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The UK services sector continued to grow in November, continuing its upwards trend since taking an EU referendum linked hit in July.

According to data from the latest Markit/CIPS UK Services PMI Business Activity Index, the index rose to 55.2 from 54.5, which was the fastest expansion since January. The November result signaled growth for the fourth consecutive month.

According to Markit, new business also rose for the fourth successive month, and at the second-fastest rate since January. The research company predicts the economy will grow by 0.5 per cent in the fourth quarter.

However, Markit also cited anecdotal evidence of ongoing uncertainty among service providers that was linked to Brexit, the value of Sterling and the US election result.

The rate of job creation was highest since April but remained weaker than the pace seen during 2014 and 2015.

Markit chief business economist Chris Williamson says: “Rising prices – often linked to the weaker pound – are a big concern, however, and suggest that inflation is set to lift higher. The past two months have seen the steepest rise in businesses’ costs for over five-and-a-half years. These higher costs will inevitably feed through to consumers in the form of higher prices.

“The sustained improvement in the business surveys and sharp rise in prices suggest that the odds will continue to shift away from the Bank of England adding more stimulus. However, any policy tightening still seems a long way off given the uncertainty facing the UK economy. The  service sector PMI data showed that business optimism about the coming year dipped in November, to the second-lowest in four years.”

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