UK service sector
UK service sector rose at its slowest rate in four months Reuters

The UK services sector rose at its slowest rate in four months, but growth in this powerhouse sector still points towards a strong start to the year, a report has claimed.

January's survey of purchasing managers in the service sector eased to 54.5 from December's 56.2, according to IHS Markit. This was the slowest rate of growth since October. Any number above 50 indicates growth.

The report said service sector firms – which accounts for almost 80% of the economy – reported robust levels of optimism as the UK government prepares to trigger Brexit talks by the end of March.

But the survey said inflationary pressures "remained intense", with prices rising at their fastest rate since March 2011.

The pound has slumped by some 16% against the dollar since Britain voted to leave the European Union in June, making imports more expensive.

Markit chief business economist Chris Williamson said: "Service sector growth eased after a strong end to 2016, but the January surveys still point to a buoyant start to 2017 for the UK economy."

Williamson added that its services, manufacturing and construction data this week point to "robust" first quarter gross domestic growth of 0.5%.

IHS Market chief European and UK economist Howard Archer added: "While these are surveys rather than hard data and not too much should be read into one month's figures, it nevertheless fuels our suspicion that the UK economy will find life increasing difficult during 2017 and that growth will gradually lose buoyancy like a slow puncture."

Earlier this week the Bank of England said the UK economy would grow by 2% this year, well above the 1.4% forecast they made in November.

But the central bank added it expects inflation to hit its intended 2% target in the current quarter, before growing to 2.7% in early 2018.