Economists hail ‘light at the end of the tunnel’ as UK’s crucial services sector FINALLY returns to growth at fastest rate for five years
- The closely-watched services PMI figure returned to growth territory last month
- The measurement of 56.5 recorded for July was highest in the UK for five years
- Growth is coming from a low base after a plunge during the coronavirus peak
There were signs of ‘light at the end of the tunnel’ for the UK economy today as the crucial services sector finally returned to growth.
The closely-watched PMI index recorded a level above 50 – representing expansion – last month for the first time since February.
The services measurement of 56.5 was marginally below the expectations of analysts, but still suggests the fastest rate of growth for five years.
It will be a boost for Boris Johnson and Rishi Sunak, as they desperately try to breathe life into the economy after the brutal lockdown to tackle coronavirus.
Service providers saw activity surge after being boosted by the reopening of non-essential retailers in mid-June and a raft of leisure and hospitality businesses at the start of July.
The measurement of 56.5 for July was marginally below the expectations of analysts, but still suggests the fastest rate of growth for five years
Around 38 per cent of respondents reported an increase in business activity during the month, with only 24 per cent reporting a decline.
However, it said that some firms noted that ‘output had simply risen from an extremely low base’ as concerns remain over the length of time the economic recovery will take.
Meanwhile, new business volumes increased for the first time in five months and at the fastest pace since January.
Tim Moore, economics director at IHS Markit, which compiles the PMI index, said: ‘UK service providers are starting to see light at the end of the tunnel after a record slump in business activity during the second quarter of 2020.
‘Higher levels of service sector output were almost exclusively linked to the reopening of the UK economy after lockdown measures and the subsequent return to work of employees and clients.
‘However, these are still the very early stages of recovery and survey respondents often commented on achieving growth from an exceptionally low base.’
The survey also showed employment was a ‘weak point in July’ as staffing numbers fell at an accelerated pace as the winding down of the Government furlough scheme neared.
It said that around one-third of those surveyed reported a drop in employment, while only 11 per cent signalled an improvement.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘This undoubtedly good news is masking some underlying problems that will still need addressing.
‘Employment fell even more quickly in July as some firms made redundancies in response to worries about the length of the recovery.’
The news will be a boost for Boris Johnson and Rishi Sunak (pictured in Yorkshire on August 1), as they desperately try to breathe life into the economy after the brutal lockdown to tackle coronavirus