Confidence among UK services firms hits three-year low before EU vote

LONDON (Reuters) - Confidence in Britain's dominant services sector fell to its lowest level in over three years in the three months to May ahead of the country's European Union membership referendum in June, a survey showed on Thursday. "Companies are sounding the warning bell as they get to grips with increasing uncertainty," Rain Newton-Smith, the Confederation of British Industry's director of economics, said. As well as the EU vote on June 23, volatility in global financial markets earlier this year and a slowdown in the world economy also weighed on British services firms, the CBI said. However, business conditions and demand were holding up reasonably well, Newton-Smith said. Britain's economy slowed in the first three months of the year and revised figures due to be published at 0830 GMT on Thursday are expected to confirm that the services sector - which accounts for almost 80 percent of the economy - was the only driver of growth in the period. The economy is expected to slow further in the second quarter of 2016 due to uncertainty about the referendum. Bank of England Governor Mark Carney and Chancellor George Osborne have said the economy could fall into a recession if the vote results in a decision to leave the EU. The CBI survey showed firms intended to increase investment. Employment in the sector picked up over the three months to May and was expected to rise further over the next three months. (Reporting by Ana Nicolaci da Costa; editing by William Schomberg)