Harsh winter weather stalls UK recovery

By HUGO DUNCAN FOR THE DAILY MAIL
Updated: 17:54 EST, 6 January 2011

The economic recovery came to a juddering halt in December as the big freeze stifled growth, a monthly report showed yesterday, writes Hugo Duncan.

The powerhouse service sector - which includes hotels and restaurants and transport and finance companies - shrank for the first time since April 2009, according to research group Markit.

Along with a decline in construction, it all but wiped out the impressive gains made by manufacturers last month and left the recovery on shaky ground at the end of 2010.

Halt: The big freeze stifled economic growth according to a report by Markit

Markit chief economist Chris Williamson said the economy suffered 'near stagnation' in December as the 'severe winter weather disrupted business'.

As well as the snow, he said output was hit by cutbacks in the public sector and added that strong exports just about offset wilting demand at home.

Markit predicted growth of 0.4 per cent in the fourth quarter of 2010, down from 0.7 per cent in the third and 1.1 per cent in the second.

'The UK appears to be on course for disappointing growth in early 2011 especially as any rebound from weather-related disruptions will occur alongside the increase in VAT,' said Williamson.

But Philip Shaw, chief economist at Investec, advised against reading too much into the December slowdown. 'What the survey is saying is that activity was hit badly by the snow,' he said. 'It doesn't tell us much about the underlying trend.'

Markit said its gauge of activity in the services sector - where 50 is the cutoff between contraction and growth - dropped from 53 in November to 49.7 in December.

It came hot on the heels of an even weaker reading of 49.1 for the construction industry and took the gloss off the best score in 16 years for manufacturing - a whopping 58.2.