By Christina Fincher
LONDON, April 7 (Reuters) - The pace of contraction in Britain's dominant services sector eased in the first quarter of this year although manufacturing plumbed new depths, a survey by the British Chambers of Commerce showed on Tuesday. The survey of more than 6,500 firms tallies with last week's purchasing managers' surveys in suggesting Britain's recession may have passed its lowest point.
But it shows the economy is still contracting at a worrying rate and supports manufacturers' complaints that they are being hit hardest by the downturn.
"Although it is encouraging to see improvement in the service sector, there is more pain to come in this downturn," said David Frost, BCC director general. "Manufacturing is still being hammered and exporters see little light at the end of the tunnel."
Britain's service sector accounts for around three-quarters of the economy compared with around 14 percent for manufacturing.
The first quarter domestic sales balance for services companies improved eight points to -23 while the domestic sales balance for manufacturing firms dropped 17 points to a record low of -55.
Manufacturing orders from overseas dropped nine points to -28, suggesting the pound's decline over the past year has done little to offset the slump in global demand.
Frost said the sharp decline in trade finance was at least partly to blame for manufacturers' difficulties and urged the government to do more to help.
The BCC was one of the first groups to forecast a recession last year and the depth and breath of its survey makes it a closely watched barometer for the state of the economy as a whole.
On the basis of its first-quarter results, the BCC said Britain's economy was likely to shrink by 1.25-1.5 percent in the first quarter, less than the 1.6 percent contraction in the fourth quarter of 2008. For 2009 as a whole, it is forecasting a contraction of 3.25-3.5 percent.
(Editing by Ron Askew)