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UK Services Activity Remains Subdued Despite Topping Expectations

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British services sector expanded at a faster-than-expected pace at the end of 2018 amid modest gains in activity and demand, yet the overall business situation remained subdued, survey data from IHS Markit showed on Friday.

The CIPS UK Services Purchasing Managers' Index rose to 51.2 from November's 50.4, a 28-month low. Economists had forecast a score of 50.7.

A PMI reading above 50 suggests growth in the sector.

Reports from survey respondents suggested that Brexit-related concerns were a key factor weighing on business-to-business spending at the end of 2018 and subdued consumer demand acted as a brake on sales for some firms, IHS Markit said.

Thanks to a weak pick up in new work, service sector job creation was the lowest in 29 months during December. Cost cutting efforts also contributed to softer employment growth.

Input cost inflation edged up slightly from November's six-month low.

Service sector business confidence weakened for a third straight month and was the second-weakest since March 2009.

The UK Composite PMI rose to 51.6 from 51 in November, defying economists' expectations for a decline to 50.8.

The latest reading was the second-lowest since July 2016.

"Combined with disappointing growth in the manufacturing and construction sectors, the meager service sector expansion recorded in December is indicative of the economy growing by just 0.1%.in the closing quarter of 2018," IHS Markit Chief Business Economist Chris Williamson said.

"Both manufacturing and services have seen previously solid hiring trends stall to near-stagnation, underscoring how the uncertainty faced by businesses will inevitably feed through to households as the job market deteriorates," he added.

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