UK service industry growth at its slowest rate in 5 years.

Companies in the UK service industry have reported that growth thus far has been slow and is currently experiencing a five-year slump as a result of the credit crunch that has squeezed economic growth.

It has become apparent that the credit crunch began to impact the wider economy in the across April and has hit the service sector hard with hotels, restaurants and banks feeling it hardest.

Currently business confidence and expectations are at their lowest levels since the terrorist attacks in 2001.

The index compiled by the Charted Institute of Purchasing and Supply suggested that the index has fallen from 52.1 to 50.4 indicating that confidence in the sector is low and has fallen dramatically just in the last month.

As slowing demand has been accentuated by the tightening of credit, it is clear that the current situation can still get worse.

As inflation is still on the horizon, as indicated by the Bank of England’s activity regarding the interest rates, in their bid to control inflation.

Many economists are predicting a further cut to happen by June at the very latest.

The current situation is compounded by the weakening of the pound, which has fallen by 0.3 against at the dollar trading today at $1.96579.

The housing slump has been the primary threat to consumer spending, although the threat of higher bills and food prices cannot be underestimated as price pressures on firms at a record high with 67.3 per cent of purchasing managers believing that overall prices have risen again in April.

Higher energy costs are also cutting profit margins and increasing the threat of inflation as oil prices have doubled just in the last five years.

Story link: UK service industry growth at its slowest rate in 5 years.