British service sector activity expanded at the fastest pace in more than sixteen years in October, a survey by Markit Economics and the Chartered Institute of Purchasing & Supply (CIPS) revealed Tuesday.

The headline seasonally adjusted business activity index rose to 62.5 in October from September's 60.3. The October reading represented the sharpest rise in activity since May 1997.

"This has largely been the result of rising levels of incoming new business placed with service providers as market sentiment has improved in line with a strengthened economic climate," Markit said.

The survey found that incoming new work rose at the sharpest rate recorded since the survey began in July 1996. Employment increased markedly during the month. The report also noted that cost inflation accelerated on the back of higher utility and wage bills.

The all-sector PMI, measuring business activity across the UK private sector economy, hit an all-time high of 61.5 in October, up from 60.2 in September.