Britain's service sector posted solid growth in September, rounding off its strongest quarter in over 16 years, helped by a recovery in the country's housing market, a survey showed today.

The headline Markit/CIPS Purchasing Managers' Index (PMI) for services eased to 60.3 from August's near seven year high of 60.5.

The reading, well above the 50 level that indicates no change, was higher than the 60 consensus forecast of analysts polled by Reuters.

The sector saw jobs growth in September, something mirrored in surveys of manufacturing and construction earlier this week.

Over the third quarter as a whole, the index - measuring the change in activity, including income and chargeable hours worked, from the previous month - averaged its highest level since the second quarter of 1997, Markit said.

"Growth is being led by financial services - linked in part to increased housing market activity - and the business sector,"said Chris Williamson, chief economist at survey compilers Markit.

"Consumer-facing services continue to struggle, reflecting the ongoing squeeze on incomes due to weak pay growth and high inflation."

Around half of firms surveyed in the service sector - which makes up more than three quarters of Britain's output - expected even brisker trade in a year's time, with the outlook index rising to 71.8.

Service providers reported that a jump in new business last month placed strain on resources, with backlogs of work rising at the fastest pace in more than 13 years.

The workload, along with firms' optimism about future business, led to a solid rise in employment and some pay rises.

Markit's composite index, which brings together surveys of services, manufacturing and construction, came in at 60.4 in September and averaged 60.2 over the third quarter - the fastest rate of quarterly growth since records began in 1998.

This suggests the economy expanded by 1.2% in the three months from July to September, Markit said.

As a result, overall employment recorded the fastest rise in six years, it added, forecasting that hefty amounts of outstanding business would continue to drive hiring.

This contrasts with the Bank of England's view that substantial spare capacity in the economy will put a brake on job creation, delaying a rise in interest rates.

The Bank of England said in August that it would not consider raising borrowing costs before unemployment falls to 7%, something it expects to take at least three years. The bank also said it would drop its commitment to ultra-low rates if inflation looked likely to get out of control.

Markit's service-sector surveys have so far shown few signs of that happening. Prices charged rose only slightly in September and at the slackest pace in four months of modest inflation despite stronger rises in input costs.

The surveys cover transport and communication, financial intermediation, business services, personal services, computing and IT, and hotels and restaurants, but excludes retail.