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Services Sector Activity Falls As Austerity Measures Begin To Bite

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Services, which account for three quarters of the economy, shrank 0.4pc month-on-month, reversing much of the September's encouraging 0.7pc rise, according to the index from the Office for National Statistics (ONS).

Half of the drop was due to the Government and other services category, which dropped 0.7pc month-on-month – the most since May 2008 - suggesting that public sector austerity measures were already beginning to bite.

Hotels and restaurants also suffered, dropping 0.4pc on a monthly basis, as did transport, storage and communication businesses, down 2pc.

Howard Archer, chief UK economist at IHS Global Insight, said the figures raised concerns as to how the economy held up in the final quarter of the year.

"Overall, the evidence suggests that the services sector is currently still seeing moderate expansion," he said. "However, it is clear that the services sector is already being affected to a limited degree by the cutbacks in government spending."

Mr Archer noted that the monthly numbers can be volatile, and that output was up 0.6pc in the three months to October quarter-on-quarter, compared to 0.5pc reported in September.

"While the drop in services output in October is disappointing, it is important not to read too much into it," he added.

So the public sector austerity drive of spending more money is having an effect already on the economy?

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
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      • Even
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      • up 5%

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