The Markit/CIPS Purchasing Managers' Index (PMI) rose to 57.1, a "marked improvement" on February's 52.6. A figure above 50 indicates expansion. And the pound rose by more than a cent against the dollar in response, as the services sector accounts for around three-quarters of the UK economy.
The feared weakening of the sector in response to government cuts has abated for the time being. More activity was the result of increased business enquiries and higher levels of new work.
CIPS’ chief executive David Noble said: “A complex array of forces were at play in the UK services sector last month, resulting in the strongest rate of growth for over a year, but also a further squeezing of profit margins. Where possible companies tried to avoid passing on higher costs due to highly competitive market conditions.”
However, Noble went on to warn that, although there was a marginal increase in recruitment for the first time in nine months, there are likely to be a few wobbles to come, not least as businesses wait to see the true impact of government spending cuts over the summer months.
Markit’s senior economist, Paul Smith said: “Services activity growth surprised well to the upside in March, and points to the strongest expansion of the sector since the economy was surging out of its recession early last year."
The results of the survey took analysts by surprise, with Ross Walker at RBS saying: “It’s extraordinarily strong. The scale of the improvements suggests there is some genuine underlying recovery.”
However, others warned that the figures might represent a ‘blip’, particularly given that the British Chambers of Commerce figures suggest a slow to modest growth in the services sector.
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( 3 / 224 )A survey of 6,000 UK businesses by the British Chamber of Commerce (BCC), published today, will show that the economy edged back to growth in the first quarter of this year after a contraction late last year. However, despite the growth, manufacturers’ confidence in the economic outlook has fallen sharply.
According to BCC Chief Economist, David Kern, growth will continue this year but at a slower rate. "The survey results show a fragile economy with some areas of strength, but sufficiently disappointing to take the view that the Bank of England should go easy on rates," he said.
The survey reveals that eight out of 10 manufacturers expect rising materials costs to force them to raise prices and their prediction is gloomy for profitability and turnover in the next three months. However, exports are strong, helped by a pick up in global demand and a weak pound.
Generally, there has been a worsening across all the key balances, pointing to a difficult economic environment in recent months, the survey says. The service sector showed mixed results, with improvements "slight and still inadequate".
Against this backdrop and with high inflation and an uncertain recovery, most economists expect the Bank of England to maintain the rate at its historic low of 0.5 percent on Thursday. Kern believes that the results of the survey show that the longer it waits to raise the rate, the better the growth profile of the economy.
BCC Director General, David Frost said: “The results show our economy faces a difficult year. The recovery will be consistently choppy. As the public sector cuts start to bite, the Government must get the detail right on the measures announced in the Budget to generate economic growth by helping businesses thrive."
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( 3 / 130 )According to the Work and Families Act, which came into force on April 1st, mothers are entitled to 39 weeks of paid leave as opposed to the current time of 26 weeks. Statutory Maternity Pay (SMP) is now paid at a rate of 90 per cent of salary for the first six weeks and then a maximum of £112.75 for a further 33 weeks.
Women will also be able to go into work for a total of 10 days during their maternity leave without losing their SMP entitlement.
The period of notice for returning to work from maternity leave will be extended to two months from the current 28 days, to make it easier for businesses to plan their staffing needs.
And now fathers can claim two weeks’ Statutory Paternity Pay (SPP) at £108.85 a week or 90% of their average weekly earnings - whichever is the least - from the date of birth or up to eight weeks from the birth. This means that parents could take six months off work each.
And the right to flexible working will be extended to the carers of sick or disabled people from April 6th, whereas it is currently limited to the parents of young children.
To cheer employers up even further, the government aims to increase paid maternity leave again to one year by the end of the current parliament. The Act also allows for the government to introduce a right for fathers to request up to 26 weeks unpaid paternity leave.
While the government says that the cost to businesses will be "quite small" at between £25m and £70m, a survey conducted by the British Chambers of Commerce showed that more than half the firms polled opposed giving extra paternity leave on the grounds of the huge administrative burden it imposes.
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( 3 / 66 )Next week the Government will flesh out draft plans mentioned in the budget to reform the state pension and Secretary for Work and Pensions, Iain Duncan Smith, has announced that the reforms will reward people who save for their retirement.
In a speech on the final day of the Commons financial statement, Mr Duncan Smith said “Seven million people are not saving enough for the retirement that they want and few will be able to rely on a guaranteed income in retirement, as the numbers saving in defined benefits schemes in the private sector have halved in the last 20 years. In fact less than half of the entire working age population is currently saving in a pension at all.”
It is believed that there will be a new, flat rate scheme, which will start around 2015, and estimates of the flat rate figure vary between £140 and £155 a week. The current full rate pension is £97.65 a week but that can be topped up to ensure a minimum rate of at least £132.60.
The flat rate pension will only be available to new pensioners rather than the millions of existing ones. More than one-and-a-half million eligible pensioners do not claim pension credit, and the Government believes that such individual losses of entitlement would not occur under a simpler flat-rate system.
Mr Duncan Smith went on to say “This Budget is about rewarding those who do the right thing” and that the pension reform “will provide, I believe, a clear foundation for saving… We have to send out a clear message across both the welfare and pension system: you will be better off in work than on benefits and you will be better off in retirement if you save.”
Keeping in line with the simplification of systems this Government wants, Mr Duncan Smith went on to say “Less means testing, of course, is the key to this.”
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( 3 / 224 )It’s never too early to get children into good habits and later today details of the planned new Junior Individual Savings Accounts (Isas) will be laid out. These tax-free Isas will have a maximum annual contribution of £3,000 and the aim is to introduce them by November.
Junior Isas will replace the Child Trust Funds, which have been phased out but, unlike the CTFs, Junior Isas will have no Government contribution. The savings plans, which will be offered by high street banks and building societies, will be ‘locked in’ until the child is 18 and will then become adult Isas by default.
If the total amount is invested each year, a child will have a pot of £54,000 plus any interest, by the time he or she is 18 and, like any adult Isa, the money can be invested in funds or used to buy stocks and shares.
The Treasury believes that currently six million children will be eligible for the Junior Isas with 800,000 more becoming eligible on an annual basis.
One criticism of the scheme is that the children of poorer families or those in care wouldn’t benefit as, unlike better off children there would be no family or friends to contribute to the pot. However, the Government has announced that provision will be made for children in care and that up to £5m will be spent on the scheme for them annually.
Children’s charities have been campaigning to ensure that children in care don’t miss out on the tax-free Isas, which could make a big difference to their lives once they reach 18. Barnardo’s Chief Executive, Anne Marie Carrie, said “This modest investment into savings accounts for looked after children will help these young people achieve their goals and avoid negative outcomes such as homelessness or falling into cycles of debt."
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