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UK Service Sector Growth Tumbles To 28-month Low Amid Brexit Uncertainty

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UK services sector growth slowed to its weakest level in nearly two-and-a-half years in November, amid weaker growth in both business activity and new work as Brexit concerns intensified, defying expectations for a modest improvement.

The CIPS UK Services purchasing managers' index, or PMI, fell to 50.4 from 52.2 in October, marking the lowest level since July 2016, survey results from IHS Markit showed on Wednesday.

A reading above 50 signals expansion in the services sector. Economists had forecast a score of 52.5.

The UK Composite PMI, which combines manufacturing, construction and services, also fell in November, down to 51 from 52.2 in October. Economists had expected a reading of 52.3.

Both the services and composite PMIs were the lowest since July 2016.

"The surveys are so far consistent with 0.1 percent GDP growth in the fourth quarter, thanks to the expansion seen back in October, but growth momentum has since been lost and risks are clearly tilted to the downside," IHS Markit Chief Business Economist Chris Williamson said.

"As such, unless demand revives, a slide into economic decline at the turn of the year is a distinct possibility," he added.

Lawmakers are debating Prime Minister Theresa May's Brexit deal agreed with the European Union. The deal faces stiff opposition in parliament, which will vote on the same on December 11.

The Bank of England has warned that the UK economy will take a savage hit, the kind not even seen during the global financial crisis a decade ago, in the event of a disorderly Brexit.

Data from the car industry body SMMT showed on Wednesday that new car registrations dropped 3 percent year-on-year in November, reflecting uncertainty, falling consumer confidence and supply constraints.

SMMT Chief Executive Mike Hawes said it was critical that a Brexit deal is secured to boost consumer confidence.

There was more evidence in November that the heightened Brexit uncertainty was prompting clients of services firms to delay their business investment decisions. Consequently, business and consumer spending was subdued.

New business growth eased for the third month in a row and was the weakest since July 2016 and work-in-progress dropped the most since September 2009.

Employment growth was the weakest in four months as services firms were more cautious in hiring due to softer demand growth and rising staff salaries. The difficulty to find suitably skilled staff was another reason for lackluster job creation.

Input cost inflation slowed to a six-month low and the rate of price charged was one of the weakest seen since mid-2017. Subdued demand conditions encouraged some firms to give price discounts in November.

Business optimism weakened again in November to its lowest level since July 2016, mainly due to Brexit uncertainty.

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