GROWTH of the UK's dominant services sector accelerated in March to its fastest pace in seven months, although it remained well adrift of the rate achieved in autumn 2013, a survey has shown.

The report from the Chartered Institute of Procurement and Supply (CIPS) prompted Chris Williamson, chief economist at survey compiler Markit, to project UK economic growth would have accelerated slightly to 0.7 per cent in the first quarter.

This forecast is based on the services survey and also reports published by CIPS and Markit in recent days on March activity in the UK manufacturing and construction sectors.

However, Howard Archer, chief UK economist at consultancy IHS Global Insight, stuck with his projection that gross domestic product growth in the first quarter would have matched the 0.6 per cent rate in the final three months of last year.

The UK economy grew by 0.9 per cent in the first quarter of 2014, but expansion slowed during the course of last year.

CIPS's business activity index for services rose from 56.7 in February to 58.9 in March on a seasonally-adjusted basis, moving further above the level of 50 deemed to separate expansion from contraction to signal the fastest growth in this sector since last August. The service sector survey does not include retail.

The business activity index for services had hit 62.5 in October 2013.

The latest survey found that expectations among service sector companies of business activity levels in 12 months' time were at their strongest since May 2014.

CIPS said this positive sentiment was linked to marketing campaigns, new products, foreign investment, export demand, and an improving construction sector.

However, it added that there was a degree of uncertainty associated with the forthcoming General Election, which had weighed to some extent on expectations.

CIPS's survey showed that employment in the UK services sector grew in March at its slowest pace so far this year, although it remained strong by historical standards.

And the rate of new business growth for services companies accelerated in March to the fastest pace since last September, the survey showed.

Predicting UK growth in the opening three months of this year on the basis of CIPS's services, construction and manufacturing reports, Mr Williamson said: "The three PMI (purchasing managers' index) surveys collectively indicate that the economy grew by 0.7 per cent in the first quarter, reviving from the slowdown seen late last year."

CIPS chief executive David Noble said: "Though the rate of increase in levels of employment was not as high as at the beginning of the year, the continuous 27-month rise in employment opportunities will please job-seekers."

However, he added: "Skills shortages...were still in evidence and the demand for higher salaries from skilled staff impacted on input costs for businesses."

Mr Archer said: "With [growth of] incoming new business rising to a six-month high in March, outstanding business rising and business expectations at a 10-month high despite uncertainty over the looming General Election, prospects look bright for the services sector in the near term at least. This was also reflected in robust employment growth in the sector."

He added: "However, we expect that GDP growth came in again at 0.6 per cent quarter-on-quarter in the first quarter. With latest hard data showing dips in industrial production, construction output and services output in January, it looks hard for the economy to have grown by more than 0.6 per cent quarter-on-quarter despite the encouraging surveys."