The service sector makes up 75% of the UK economy and includes everything from banks to pubs to hairdressers, but fears grew about a double dip recession after the sector contracted in the last quarter of 2011. However, in the first quarter of 2012 the sector grew by almost 0.5% thanks to strong data from the manufacturing and construction sectors.
Double dip recession fears were caused in part by the crisis in the EU, which sparked fresh worries about the likelihood of recovery. This was initially borne out by figures from the Organisation for Economic Co-operation and Development, who released a warning in late March that the UK was back in recession. However, fresh data showing economic growth has revealed the opposite to be true and has dispelled many fears of being plunged back into a recession nightmare.
Chris Williamson, chief economist at Markit, said: "Faster growth of services activity in March indicates that the economy is on the up again, skirting recession as business continues to bounce back from the lull seen late last year."
"What's particularly encouraging is that this revival of business confidence is encouraging firms to take on more staff. However, this is no runaway recovery. Although on the rise, job creation and inflows of new business continue to run well below rates generally seen in the years prior to the financial crisis."
Part of the rise in growth took place in February with an increase in business activity to 53.8 on The Purchasing Managers Index (PMI). This was followed by an increase to 55.3 in March, which boosted growth to the highest level seen since early 2010. The PMI Index also showed that the confidence of the sector about what lay ahead for them in the rest of the year remained as high as it was in February.
Sir Richard Lambert, a former member of the Bank of England's Monetary Policy Committee and former Director General of the CBI, said:"The hope would be that as the year goes on and as inflation - we hope - continues to slow down then the squeeze on real incomes, which is what really shocked us all last year and knocked household consumption back by record numbers, will come off a bit. People will become a bit more confident and a bit less harassed as they go forward."
There have been a number of business surveys being carried out in the last month, and while not showing strong figures they show a consistent positive trend. While the economy may not be recovering in leaps and bounds, it is showing some resilience to economic knocks which experts suggest is a good foundation to build in for the future.
A spokesperson for Scotish Debt Solutions Company, Sequestration.net, commented by saying: “This is very encouraging news, and could be the start of a slow but steady recovery of the economy. Missing the double dip recession, while only by a small amount, is still a massive boost to morale and has lifted the dark pessimistic mood at the end of last year. Hopefully, this trend will continue and the economic recovery can get under way in earnest.”