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UK services sector in fastest growth since March 2012

image captionThe service sector accounts for about three-quarters of the UK's economic output

The UK's services sector, which accounts for around 75% of the economy, grew at its fastest rate since March 2012, new data suggests.

The Markit/CIPS Services Purchasing Managers' Index (PMI) for the UK rose to 54.9 in May from 52.9 in April.

Any reading above 50 indicates growth in the sector, and Markit said the UK economy had "all cylinders now firing".

It follows encouraging UK PMI manufacturing and construction sector figures earlier this week.

Despite the positive report, the FTSE index of leading UK shares was down by 1.5% at 6458.13 in afternoon trade in London.

The latest set of figures was boosted by good weather and the sharpest rise in new business growth since February 2010.

The boost in new work was helped by promotions, new product launches and a willingness among customers to commit to new business.

The report also said that although employment growth in May had been modest, it was the strongest it had been in three months.

And it noted that staff had been hired not only to deal with current workloads but also in anticipation of increased work in coming months.

Meanwhile, price inflation continued to fall, hitting a one-year low.

'Decent result'

"The UK economy has moved up a gear with all cylinders now firing," said Chris Williamson, economist at Markit.

He said it meant the new Bank of England governor Mark Carney would have the benefit of taking over a UK economy that was showing signs of "escape velocity" from the the doldrums of the past two years.

And analyst Phil Shaw at Investec agreed that the latest figures were encouraging.

"It's a very decent result," he said. "It's encouraging that all three PMI surveys have been positive this week.

media captionChris Williamson, economist at Markit: "There are really promising signs that the economy is picking up speed"

"It follows a run of generally better-than-expected data and suggests the economy is on a firmer footing."

The Markit services survey covers things like transport, storage and communication, financial and business services, personal services, computing and IT, and hotels and restaurants.

It will be welcome news for Chancellor of the Exchequer George Osborne, who will be hoping second quarter UK growth can match or exceed the 0.3% in the first three months of the year.

"Once again the outturn is not only above expectations but above the top end of the City forecast range," said Ross Walker, economist at Royal Bank of Scotland, referring to the latest PMI statistics.

"It certainly reinforces the notions that growth in Q2 is at least matching Q1."