The service sector in the UK expanded in February at the fastest monthly pace for three years, according to data produced by the Chartered Institute of Purchasing and Supply (CIPS).

The CIPS index rose to 58.4 from 54.5 the previous month, its highest since January 2007. Any index score above 50 indicates growth.

Areas covered in the services sector include transport and communication, financial advice, computing and IT, and hotels and restaurants.

"Though the VAT change and rising fuel prices continue to make their mark, service providers are feeling confident enough to raise output prices to partially offset this," said CIPS chief executive David Noble.

These figures - combined with recent data showing that consumer confidence is rising and firms are hiring more staff - have slightly allayed fears that the economy could slip into recession again.