Service sector records 'dismal' performance

The British Chambers of Commerce (BCC) said the results of a survey of 5,000 firms showed "worrying" falls in exports as companies faced "serious" challenges in the coming year.

The business group called for measures to sustain the economic recovery and support companies as they deal with the Government's austerity measures and the new year increase in VAT.

Despite the "disappointing" figures, covering the three months to September, the BCC said UK growth remained in positive territory, adding that a new recession could be avoided.

BCC director-general David Frost said: "Overall, these results are disappointing, particularly for the service sector, although they did show that manufacturing was significantly stronger in the third quarter.

"These results highlight the fact that wealth-creating businesses must be supported for Britain to achieve a sustainable recovery.

"Businesses accept the Government's austerity measures, but now it's time to shift the national debate from cuts to what needs to be done to grow the UK economy. The private sector will do the heavy lifting, but the Government must play its part by supporting capital investment in crucial infrastructure projects. Businesses must be given the freedom to create jobs and wealth, exporters must be supported more actively, and the burden of red tape on employers should be reduced or scrapped wherever possible."

Chief economist David Kern added: "The results for the third quarter of this year show a marked slowdown in the pace of the recovery.

"The dismal performance of the service sector is particularly disturbing, since it occurs even before VAT is due to rise to 20 per cent, and before the full impact of the tough deficit-cutting measures take effect.

"The results also show worrying falls in all the export balances, at a time when rebalancing the economy must be a key aim."