Doubts over the sustainability of emerging growth in the UK�s service sector intensified yesterday when a key survey revealed a slight slowing of expansion last month from May�s modest pace and a renewed fall in firms� new business inflows.

Doubts over the sustainability of emerging growth in the UK's service sector intensified yesterday when a key survey revealed a slight slowing of expansion last month from May's modest pace and a renewed fall in firms' new business inflows.

The Chartered Institute of Purchasing and Supply's headline business activity index for services dipped from 51.7 in May to 51.6 in June. May had been the first month since April last year that the index came in above the level of 50 which separates expansion from contraction.

The fall in the index in June was the first drop since November. While the IT and computing sector reported firm growth in June, there were signs of weakness in the consumer-facing hotels, catering and restaurants category.

The incoming new business index, which rose above 50 in May to a level of 51.8, fell back below the no-change mark to 49.7 in June. This is of particular concern, given new business is a forward-looking indicator.

CIPS' service sector survey also showed companies continued to slash staffing levels in June. The rate of job-shedding accelerated between May and June.

The difficult environment for service sector companies was highlighted by CIPS. It said: "Service providers continued to comment on a tough economic climate, which was a key factor driving sales volumes lower during June. Panelists reported that sales pipelines lacked potential for significant growth, and that many clients remained unwilling to commit expenditure amid ongoing uncertainty.

"Subsequently, incoming new work was slightly down in June, with the largest falls amongst those companies with the relatively greater exposure to consumer spending, such as hotels, catering and restaurants, and personal services."

Paul Smith, senior economist at survey sponsor Markit Economics, said the service sector survey, combined with CIPS' reports this week on manufacturing and construction, continued "to support the notion that very marginal GDP growth may be recorded in the second quarter".

GDP plunged by 2.4% in the opening three months of this year - its steepest quarterly decline since 1958.

Although he highlighted the possibility of modest UK economic growth in the second quarter, Smith said: "The underlying services data and anecdotal evidence indicate that the business climate remains fragile, with tight lending conditions and rising unemployment remaining key threats to continued service sector recovery."