The strongest green shoots yet seen in the UK economy appeared today with figures showing that the key services sector grew in May, for the first time in a year.

The Chartered Institute of Purchasing and Supply's (CIPS) services index, in which any score above 50 marks growth, showed an activity index reading of 51.7 for last month - the first time the beleaguered sector has pulled into positive territory since April last year.

About 70% of the economy is made up of service sector companies, so today's news of a return to growth gave hopes for stabilisation in the UK economy a major boost.

James Knightley, of Capital Economics, said the reading, taken with other recent positive survey evidence, suggested it was “increasingly possible” that the UK could see positive economic growth in the third quarter of this year.

He said: “This would be a remarkable turnaround for the UK economy and suggests sterling's rally has further to run.”

“Nonetheless, there are ongoing headwinds - deleveraging, higher savings, less credit availability, higher taxes and lower government spending - which will mean the recovery will likely be characterised as mild rather than vigorous,” he added.

CIPS said continued discounting in the services sector supported sales, while business confidence rose to its highest level in over a year-and-a-half.