Survey reveals brighter prospects for British economy in 2012

The prospects for the British economy in 2012 appeared brighter, after a survey revealed on Friday that business confidence in the services sector was at a nearly 12-month high.

Markit, a leading global financial information service company, and the Chartered Institute of Purchasing and Supply (CIPS), announced that the purchasing manager's index (PMI) for the services sector rose to 56 in January from 54 in December. This was the largest one-month gain in the survey's 15-year history.

''The surprisingly strong upturn in the service sector follows a similar improvement in manufacturing and ongoing growth in construction, which all points to a resounding revival of UK economic growth in January,'' said Chris Williamson, chief economist, Markit. ''The situation is certainly a lot brighter than seen in the final quarter of last year, when the economy contracted 0.2 per cent, and a slide back into recession is now looking increasingly unlikely.''

According to him, the UK economy could well expand at close to trend rate (around 2-2.5 per cent per annum) in the first quarter if business conditions hold up in the next two months.

''As to how sustainable this upturn is, it is particularly encouraging to see the upturn in business confidence, which showed the largest monthly gain since data was first collected in mid-1996.''

This rise in business optimism fuelled the largest increase in employment for nearly four years, adding to hopes that this upturn may prove to be more than a flash in the pan and can start to look like a sustainable, job creating, recovery, he added.