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According to the latest Purchasing Managers Index, the UK services sector dipped to 51.3 during October, from September’s figure of 52.9. A decline had been expected by analysts, but to 52.0. A survey by Markit, a data analyst company revealed that demand had slowed down in October. A reading on the Purchasing Managers Index which is above 50 is an indication of growth, while figures below 50 are an indication of contraction.

Respondents of the survey said that clients were hesitant when it came to committing to new contracts, as a result of the uncertain economy. The euro-zone crisis is creating hesitancy among businesses which is having an adverse effect on demand. According to the National Institute of Economic and Social Research, the UK is at risk of falling back into recession in the near future, with an increased risk if the euro-zone crisis remaining unresolved.

In 2010, growth was at 1.8 percent. According to predictions by NIESR, growth is expected to fall to 0.9 percent in 2011 and even further to 0.8 percent by 2012. As the economy worsens, UK spending will increase on payments of benefits as unemployment rises and tax revenue would decrease. A spokesman for the Treasury pointed out that growth had increased by 0.5 percent during the quarter ending in September, making a positive statement for the UK.

However, economists predict that growth will either stay level or drop as unemployment rises, the euro-zone crisis takes effect and a high rate of inflation and the government spending cuts take hold.

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