The service sector grew at its fastest rate for two years in September, according to the latest CIPS/Markit index.

The index posted a reading of 55.3, up from 54.1 in August, marking a fifth month in a row of growth.

Employee numbers have fallen for 17 consecutive months but optimism was at its highest since April 2007.

David Noble, chief executive at the Chartered Institute of Purchasing & Supply (CIPS), says: “The UK services sector is really bouncing back and regaining further ground. Growth has not only been sustained for five months now but September saw it expand at its fastest pace in two years. With future expectations hitting a near two-and-a-half year high, it’s likely we’ll see growth gain momentum over the coming months.

“However, this isn’t a consistent picture across the UK services economy. Though we’re starting to see a turnaround in the hospitality sector, some sub-sectors - such as transport and storage - are still in decline.

“With this in mind, ‘prudence’ is at the forefront of many purchasing managers’ minds. The market has not fully recovered and sales growth has been driven by heavy discounting – a tactic service providers will have to continue for some time to come. What’s more, there are still signs of excess capacity as firms continue to slash jobs.”