Indian service providers continued to be impacted by the central government's November 8 demonetisation with the Nikkei Services Purchasing Managers' Index (PMI) standing at 48.7 in January, as compared to 46.8 in December 2016.

The pound immediately shed around 0.34 per cent against the dollar in response to the softer data to trade at $1.2477. There were also further signs that companies were passing on some of that cost burden to customers in higher prices.

"Can the United Kingdom economy keep pace as inflation erodes the spending power of the consumer?"

A survey by the same firm on Wednesday showed slight improvement in the health of India's manufacturing as manufacturing PMI was up to 50.4 during the month from 49.6 in December 2016, suggesting modest expansion.

That was despite warnings that rising prices would start to hit demand.

"Momentum is fading as prices shoot up", he said.

Ireland's services sector grew at its fastest rate last month since Britain's vote to leave the European Union in June.

That's down from 56.2 previously and lower than the 55.8 the City had expected. Finally, forecasts for output from Japanese services over the coming year were positive in January, as business sentiment strengthened to the strongest rate in nine months. The services report and similar surveys out earlier this week on manufacturing and construction still indicated a "buoyant start" to 2017 for the United Kingdom economy, he added.

The survey data come on the heels of the Bank of England's updated view that the economy and adds some justification to the Bank of England's recent upgraded outlook for the economy in 2017.

"The main area of concern is the extent to which companies' costs are rising", said Chris Williamson, chief business economist at the London-based company. Backlogs declined for the first time in three months. However, the rate of job creation slowed to a five-month low.

Strong pressure on costs led firms to increase their charges in January, at a pace unchanged from December's 68-month record, the PMI report said.

But the Bank's 2017 forecast is now higher than those of most private sector economists.

Both input and output costs increased for the services sector. It therefore covers about half the economy, whereas official data on services published with more of a lag covers nearly 80%.