The Chartered Institute of Purchasing and Supply/NTC said its index of service sector business, which ranges from catering to consulting, rose to 55.9, well above the 50 mark that divides expansion from contraction.
That strong gain compared with 54.9 in December and analysts expectations of 55.3.
It was based on a pickup in new business as well as the brightest outlook for future business since June, before the British economy ran into a soft patch from which it has since rebounded. "We suspect that the momentum in the economy evident in the final three months of last year has been sustained into January and that growth could be on course to post a further rise," said Simon Rubinsohn, economist at Gerrard Limited.
He added that the market was now close to pricing in a rate hike.
However, the rate of increase in average prices services companies charged their customers eased to a year low last month, according to CIPS/NTC, suggesting that for now at least inflationary pressures are not accelerating.