Services sector weakness 'slowing recovery'

The British Chambers of Commerce (BCC) said that the results of its research indicated the economy was "on the brink of leaving recession", but said it did not see any significant growth in the fourth quarter of 2009.

While most key national indicators had improved in the last three months of the year, the BCC said progress had been weaker than in the previous quarter and a number of critical measures were still in negative territory.

The survey suggests that both sales and orders within the UK were below expectations and the crucial services sector performed worse than manufacturing in the period.

"The results reveal disturbing weakness facing the service sector; these must be remedied to enable the UK to attain a sustainable recovery," it said.

The BCC said the results do contain some positive features, with strong improvements in employment and exports in the manufacturing sector.

It said confidence was also improving and businesses were showing resilience.

But the business group called for further support measures "to sustain recovery and avert a dangerous relapse".

These included the avoidance of additional business taxes and the scrapping of a 1 per cent increase in employer National Insurance contributions.

Director general David Frost said: "Unless the private sector is given the freedom to create jobs and wealth, the UK's economic recovery will be slower than it should be, and we will face the serious risk of a double-dip recession."

According to the survey exports strengthened in the fourth quarter across both sectors.

But while manufacturing saw its strongest sales and orders balances since the second quarter of 2008, the BCC said services indicators grew only slightly in the period and remained weak.

For domestic sales and orders, the services sector stayed in negative territory.

Manufacturing domestic sales improved to their highest level since the beginning of 2008, while home orders also recovered to a six quarter high despite remaining negative.

BCC chief economist David Kern said all the domestic indicators in the period were "disappointingly feeble", particularly in the service sector.