Service sector drags on British economy

LONDON, Dec. 24 (UPI) -- An independent government-sponsored budget office in London lowered its forecast for Britain's economic growth for 2012 from 2.5 percent to 0.7 percent.

The Office for Budget Responsibility, a non-partisan government agency, lowered its prediction from 2.5 percent to 0.7 percent and said even any growth is uncertain, The Daily Telegraph reported Saturday.

"As we look forward into next year, [the question] is whether we do see the gradual pick-up in underlying economic momentum that our forecast suggests we might hope for. The big uncertainty over that is developments in the eurozone," OBR Chairman Robert Chote said in a radio interview.

"The forecast we presented a few weeks ago assumed that the eurozone struggles through. Clearly, if things turn out worse than that, it means a lot more uncertainty about the near-term prospects," he said.

With the forecast lower, yields on benchmark 10-year British treasury notes fell briefly under 2 percent, a record low, before a rebound put yields at 2.03 percent.

The Office of National Statistics said economic output in Britain's service sector fell 0.7 percent in October, the second worst performance for the year after April.

The critical service sector makes up 75 percent of Britain's production, the newspaper said.

"The fall (in the service sector) is a major blow to gross domestic product growth prospects and significantly fuels concern that the economy could contract in the fourth quarter," said IHS Global Insight economist Howard Archer.