A survey has shown that Britain's services sector grew last month at its slowest rate for 10 months, held back by subdued new business and a record monthly drop in confidence.
The CIPS/Markit services PMI headline activity index fell for the third time in four months from 55.4 in May to 54.4 in June. That was the lowest level since August 2009.
While still signalling a solid increase in activity, Paul Smith, senior economist at Markit, said it pointed to a slowdown in growth heading into the second half of 2010.
'While we continue to look for a 0.4% to 0.5% rise in GDP for Q2, this may well already represent a peaking n the recovery cycle,' he said.
The index has been above the 50 mark which separates growth from contraction for more than a year.
The June 22 emergency budget, which proposed swingeing government spending cuts and tax hikes, came in the middle of the survey, carried out between June 11 and 28.
The budget's austere measures, aimed at reining in the largest peacetime budget deficit, had an impact on new business and confidence, with some fearing a return to recession, the survey found.
Business expectations fell 8.1 points to 64, a 15-month low and the single biggest month-on-month fall in 14 years of recorded data. But levels were still firmer than at the height of the recession, with some firms optimistic about the future.
Monday's survey is the latest to highlight risks to Britain's recovery. Last Thursday, figures showed manufacturing had slowed from a 15-year high in June as export order growth all but ran out of steam.
The CIPS/Markit services survey covered everything from cafes to banks and IT services, but did not include retail or public sector services.
