by Ray Fleming

THERE was bad news from Britain's service sector yesterday with an unexpected drop of activity in December that raised anxiety about overall GDP results in the final quarter of 2012 and the first quarter of 2013. The service sector -- covering banking, retail and travel -- accounts for about three-quarters of the UK economy and is therefore a major factor in assessing the economic outlook. The fall-off in December was the first in the sector for two years and the lowest reading since April 2009. No reason for the unexpected figures was given although a negative public reaction after the Olympics period may have been a factor. The news overtook the optimism generated by positive results from manufacturing in mid-December although they had already been overtaken by poor figures from the construction industry. A revival in manufacturing is always considered essential to general growth in Britain but it has to be remembered that it now accounts for only ten percent of the economy. A decline in GDP in the first quarter of the new year would be disastrous for Britain's economic recovery -- it would signal the third recession in five years and almost inevitably lead to the loss of its triple A credit rating. It would raise again questions about the British government's economic policies and the continuing reluctance of the Chancellor to acknowledge the need for a Plan B.

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