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DUBLIN, Oct 5 (Reuters) - Ireland's services sector grew at its slowest pace in almost 3-1/2 years in September, a survey showed on Wednesday, with some firms reporting reduced interest from customers arising from Britain's vote to leave the EU.
Ireland is widely considered the European Union economy to have the most to lose from the June Brexit vote in its key trading partner and the country's finance ministry on Tuesday cut its forecasts for economic growth in 2016 and 2017.
The Investec Purchasing Managers' Index (PMI) of activity in services, which covers businesses from banks to hotels, fell to 56.2 from 59.7 in August, the lowest since June 2013 when Dublin was still working its way through an international bailout.
The index has remained above the 50 mark denoting growth for over four years as the Irish economy outperforms the rest of the euro zone. A slowdown in new business has led to a sharp fall in the headline index from the 10-year high of 64.0 in January.
"While some panellists had been able to secure new contracts in September, others mentioned reduced interest from customers, in some cases linked to the UK's decision to leave the EU," Investec Ireland chief economist Philip O'Sullivan said.
The new business sub-index also fell to a near 3-1/2 year low of 54.2 from 58.1 in August. Business sentiment dipped to its lowest level in three years, although close to five times as many respondents forecast a rise in activity over the next 12 months as those predicting a fall.
O'Sullivan also said that firms continued to struggle to keep up with client demand, with backlogs of work increasing for the 40th successive month and headcounts rising, albeit at a slower pace.
The drop in services growth followed a sister survey on Monday showing Irish manufacturing activity slowed in September, with employment in the sector failing to expand for the first time in over three years.
"With further uncertainty around Brexit and the U.S. presidential election expected between now and the year end, we are growing increasingly cautious about the prospects for Q416," O'Sullivan said.
Reporting by Padraic Halpin; Editing by Catherine Evans