UK service sector picks up pace

The service sector is having to pay its staff more

The UK service sector expanded faster last month than at any time in the past two years, a survey has revealed.

Companies also raised their prices at the fastest rate for a similar period, the study found.

Consumer spending on hotels, restaurants and personal services all showed "notable improvement" in April according to the research.

The results will have been closely examined by the Bank of England in making interest rate decisions.

The finding are another indicator of revival of the UK economy.

'Expectations improved'

The Chartered Institute of Purchasing and Supply / RBS survey also reported a growth in new business - implying that demand for services will continue to grow in the coming months.

An index measuring business investment also improved, offering hope that an increase in future business activity may be on the cards.

"A number of companies added that investments in new business facilities would underpin higher activity in one year's time," the report said.

Chief economist at RBS Group, Andrew McLaughlin, said the data suggested the UK economy was on course for higher GDP in the second quarter of the year.

While the prices being charged by service providers hit an almost two-year high, their costs were the highest for 17 months - caused mainly by surging energy costs and increased wages.

The report follows a study released last week showing manufacturing confidence had enjoyed a strong upturn during April, with the index of future business expectations hitting its highest level since November 2004.