U.K. Services Expanded for a Second Month in June

By Brian Swint and Jennifer Ryan

July 3 (Bloomberg) -- U.K. service industries from law firms to consultancies grew in June for a second month, suggesting Britain may be starting to emerge from recession.

An index based on a survey of about 700 service companies by the Chartered Institute of Purchasing and Supply was little changed at 51.6 in June from 51.7 in May, Markit said today in London. Readings above 50 indicate expansion. Economists predicted 51.5, the median of 29 forecasts in a Bloomberg News survey shows.

Today’s report adds to signs that the U.K. economy is no longer shrinking as quickly as in the first quarter, when it contracted the most in 50 years. Bank of England policy maker David Miles said yesterday that while a “rapid” return to growth is unlikely, record-low interest rates the central bank’s money-printing program is gaining traction.

“This is encouraging,” said George Buckley, chief U.K. economist at Deutsche Bank AG in London. “We should still see these numbers rise further. But if they stabilize at this level it will mean the recovery will be anemic.”

The index of services rose above 50 in May for the first time since April last year.

Freshfields Bruckhaus Deringer LLP, one of the five highest-grossing U.K. law firms, said yesterday that revenue increased 9 percent in the fiscal year ending April 9. The depreciation of the pound bolstered earnings overseas, the company said. Linklaters LLP, another of the highest-earning law firms, also said today that revenue increased.

Technology Consultants

Morse Plc, the U.K. technology consultancy, rose the most since February today after saying that earnings and revenue will be “towards the upper end” of analysts’ forecasts.

“The services sector is showing signs of life, but it is still too early to tell if this is the start of a full-blown recovery,” David Noble, chief executive officer at CIPS, said in a statement. “Consumer spending remains fragile, and firms are being forced to slash prices in order to attract customers.”

British households are paying back loans to reduce the record 1.5 trillion pounds ($2.5 trillion) of consumer debt. Homeowners reduced net mortgage debt, paying down more than they borrowed, by the most since at least 1970 the first quarter, the Bank of England said in a separate report today.

The U.K. central bank last month kept the benchmark interest rate at 0.5 percent and maintained the plan to buy 125 billion pounds of bonds with newly created money. The next interest-rate decision is July 9.

To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at jryan13@bloomberg.net