Still, the index remains far above the 50 mark denoting growth and pointed to robust growth in services, which account for more than three-quarters of Britain's economy and include major banks to high street restaurants.
Growth in new business and optimism also eased. On the heels of an unexpected slip in British manufacturing growth in March, the data suggests last year's surprisingly rapid rebound could be losing some momentum.
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The composite index combining PMIs for manufacturing and construction, plus the services sector, edged down to 58.1 in March - also its lowest since June last year - from 58.6 in February. The input price index fell to its lowest in nearly a year.
"The drop in price pressures alongside the more moderate pace of growth takes pressure off the Bank of England to start tightening policy, which should in turn take some pressure off sterling," said Chris Williamson, chief economist at Markit, which compiles the survey.
The Bank of England has indicated it is in no hurry to raise interest rates despite Britain's robust rebound, as inflation fell below the 2.0 percent target for the first time in over four years in January.
But Williamson said even though growth slowed across the services, manufacturing and construction sectors, all three are expanding at "very strong rates", suggesting the economy should have grown by at least 0.7 percent in the first quarter.
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The services sector's employment index fell to 53.5 in March from 55.6, and new orders expanded at the slowest pace in 10 months. The business expectations index fell to its lowest since November.