Sterling loses ground against euro on disappointing econ data

* Euro up 1.3 pct on the week against sterling EURGBP=D4

* Data divergence knocks pound versus euro * UK services PMI falls to 16-month low of 51.3 in Aug

By Neal Armstrong

LONDON, Sept 3 (Reuters) - Sterling was set to end the week on a negative footing against the euro after weak UK economic data contrasted with relatively upbeat euro zone figures and put the pound under pressure.

Much weaker-than-forecast UK services sector data raised concerns Britain's economy could falter later in the year.

British service sector activity grew at its slowest pace since April 2009, with a marked fall in hiring as employers worried about an economic slowdown and public spending cuts, a purchasing managers' survey showed. [ID:nSLA2KE6BQ]

"We're seeing a data divergence between the UK and the euro zone and the froth is coming off sterling. I think the euro can push on towards 84.00 pence," said Gavin Friend, currency strategist at nabCapital.

Friend said robust euro zone PMI surveys released this week had contrasted sharply with disappointing UK manufacturing, construction and service sector surveys.

At 1447 GMT, the euro was trading with slight gains versus sterling at 83.32 pence, close to a three-week high hit on Thursday at 83.47. The euro was set to end the week with gains of around 1.3 percent over the pound.

Sterling rose around 0.2 percent versus a broadly weaker U.S. dollar at $1.5440 GBP=D4, off a session high of $1.5468. The U.S. unit came under pressure versus a basket of currencies as equity markets rallied following upbeat US employment numbers.

Technical analysts at Barclays said the outlook for GBP/USD was negative so long as it held below the $1.5600 level, adding that a break below Fibonacci support around $1.5320 would be reason to turn increasingly bearish on the pound.

UK GROWTH WORRIES

Markit/CIPS said the headline UK services PMI index dropped to 51.3 in August from July's 53.1, a much sharper fall than a decline to 52.9 forecast in a Reuters poll.

The drop takes the index close to the 50 level, below which would mark contraction. Analysts said this has increased the risk that the economy could slip back into recession and that the Bank of England may resort to more quantitative easing (QE).

The weak number is of particular concern because of the services sector's importance to the UK economy and the fact that the data follows recent soft data on the manufacturing, housing and construction sectors.

"This amounts to a distinctly lacklustre survey which will no doubt fuel concerns about a double-dip," said Ross Walker, economist at RBS.

"The BoE has traditionally paid a lot of attention to this services PMI survey - the sector accounts for three-quarters of UK output ... We doubt August's print will be enough to prompt a policy change from the Monetary Policy Committee next week, but the risks of dissenting votes in favour of more QE are rising."

There was further bad news on the UK on Friday, with figures showing new construction orders fell 14 percent in the second quarter and dropped 9 percent on the year, their first decline in more than a year. [ID:nLDE6820K5] (Additional reporting by Jessica Mortimer; Editing by Susan Fenton)