Third Recession for UK Could Be Avoided Thanks to Strong Service Sector
There have been concerns over the impact that another recession could have upon an already weak UK economy. It now seems there is a possibility that the impact has been averted due to the help from growth in the service sector. The massive UK service sector grew at its fastest rate since the Olympics. This would indicate that the economy grew by 0.1% in the first quarter of 2013 which followed the contraction of 0.3% that occurred in the last quarter of 2012, according to economic research group Markit. An official recession occurs with two consecutive quarters observe a decline in the gross domestic product.
Chris Williamson, chief economist with Markit, said, “The Government and the Bank of England will breathe a sigh of relief.
“Signs of a gathering upturn in the services sector looks set to have helped the UK avoid a triple-dip recession by the narrowest of margins.”
The latest Markit index in the service sector indicated it rose from 51.8 in February to 52.4 in March with any value in the index over 50 considered as growth. The service sector includes service industries such as hotels, restaurants, transportation drivers, and law firms. The growth was important in the service sector as early forecasts of the manufacturing and construction sectors indicated likely declines.
Scott Corfe, senior economist at the Centre for Economics and Business Research, remarked, “The construction sector has contracted in every month of 2013, while the manufacturing sector contracted in two out of the three months.
“However, given the relatively small size of these sectors, and the relatively promising and better than expected performance of the services sector, the UK economy should narrowly avoid a triple-dip recession.”
The fact that the economy is still in a weakened state should assure that the government will continue to support the lending industry and keep interest rates cheap for borrowers. Mortgage and remortgage interest rates have been at all-time lows with many falling below the floor level of 3% and 2%.