UK services recovery loses momentum

He said the survey suggested the service sector was on course for a quarterly expansion of around 1.0 percent in the fourth quarter.

However, recent PMI surveys have not been matched by the official national data and some analysts worry that "survivor bias" and problems inherent with sentiment-based indices mean the PMI figures are overstating the true picture.

Britain's economy shrank 0.3 percent in the third quarter despite the fact that PMI indicators had suggested the economy had already emerged from recession.

"Given the divergence of survey results from the official data, there is reason to remain cautious," said Hetal Mehta, an economist at Ernst & Young.

The PMI report said the latest expansion had been centred on the financial and business services sectors, with large companies benefiting more than small ones.

Nonetheless, firms continued to shed jobs and there was evidence to suggest that operating conditions remained tough. Firms cut output charges despite the steepest rise in input costs for over a year, an indication that competitive pressures remained intense.

A similar survey for the euro zone showed services activity grew at its fastest pace in 23-months in November, although southern European economies trailed Germany and France.

(Editing by Ruth Pitchford and Victoria Main)