With the decline of heavy manufacturing industries such as steelmaking, mass car production and shipbuilding on the grounds of competitivity during the 1970s and 80s, the dominant component of the UK economy became its service industries (such as finance, retail, tourism, entertainment etc.). It is estimated that the service sector accounts for approximately three quarters of UK GDP today.
The latest Markit Purchasing Managers’ Index (PMI) for March suggests that the sector is expanding at its fastest rate since last August. The reading came in at 58.9, up from a February reading of 56.7 – any value over 50 indicates that the sector under study is expanding. Taken in conjunction with PMI surveys for construction and manufacturing, Markit is projecting that Q1 growth will come in at 0.7%, a stronger level than the recently revised Q4 2014 figure of 0.6%. In Markit’s opinion, the higher growth stems from a wider ecomic recovery and improving levels of confidence. The Office for National Statistics will issue its first estimate of Q1 economic activity in the week before the UK general election, so if correct, these figures will not harm the ruling Conservatives chances of staying in power.
Commenting on the March data, Markit’s chief economist, Chris Williamson, noted: "While the data support the view that the next move interest rates will be upward, the lack of inflationary pressures suggests the first hike remains some way off, and probably not this year unless we see some significant upturn in wage growth."
The Markit growth projection is in line with a recent figure from the Confederation of British Industry (CBI). The CBI was upbeat about Britian’s prospects in the current quarter, but noted that British exporters will have to contend with a strong pound; particularly in relation to Eurozone countries and that the UK economy could suffer some consequences as a result of the current difficulties Greece is facing.