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UK services sector under serious pressure

Over the last 30 years the UK has moved from a manufacturing based economy to a services based economy with literally millions of jobs created in the services industry. However, it has been revealed that for the ninth month in a row there have been significant job losses in the services sector and there are concerns that this could continue for some time to come. While there is one crumb of hope, with the rate of decline slowing in January, it is unclear whether this is indicating a stabilisation of the sector or a short-term pause.

The UK services industry now accounts for three quarters of the economic output of the country and is vital to the eventual recovery of the UK. The sectors hardest hit include hotels and restaurants with disposable income coming under severe pressure, leading to significant job cuts and cost reductions. The situation in these particular sectors could get worse before it gets better with money never tighter and the UK population targeting their income at other financial requirements.

This is one of the factors which have persuaded many economists that base rates will fall today but as we have covered in our earlier post, there are some suggesting that base reductions on their own are not enough.

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