UK business growth picks up as lockdown eases

The IHS Markit/CIPS composite purchasing managers' index (PMI) reported a “marked improvement” in business conditions across the UK in July, mainly as a result of a phased reopening of many companies.For July, the composite PMI reached 57.1 compared to 47.7 in June in an index where a reading over 50 indicates growth. It was the strongest pace of expansion in just over five years.Services sector activity rose from 47.1 in June to 56.6 in July - well above economists' expectations - while manufacturing grew at its fastest pace in 16 months, rising from 50.1 in June to 53.6 in July.Duncan Brock, group director at CIPS, said: "Amidst this brightening picture, there were some winners and losers. Some parts of the economy performed better than others, both through luck with being early to reopen and good adaptation in responding to the challenges of the pandemic."Meanwhile, the July 'Jobs Outlook' survey by the Recruitment and Employment Confederation (REC) found that, as lockdown restrictions eased,  employers’ confidence in making hiring and investment decisions rose to a net level of +4, up from -9 in June...the first occasion the reading has been in positive territory since the pre-pandemic days in February.Neil Carberry, chief executive of the REC, said it was now vital for the UK to secure a Brexit trade deal with the European Union and devise a "workable" immigration system to get the economy back on track.The REC’s 'Jobs Recovery Tracker' also found that there were a total of 1.05 million job postings in the UK in the week of 6-12 July, up from 990,000 in the last week of June. Much of the extra demand was for tech specialists.Some 200 company bosses were interviewed by REC in conjunction with Savanta ComRes and a net of +14 - up from +6 in June - forecast a demand for permanent staff over the next three months. Medium-term demand over the coming year remained at net of +15.However, expectations over the prospects for the wider economy remained downbeat with confidence levels at a net -40, although this was an improvement on recent months with increasing evidence of companies restructuring as a reaction to the impact of the pandemic. One in six employers had made redundancies in the year to July, up from nine per cent in the year to June.Mr Carberry said: “It’s good to see employer confidence rising as the lockdown measures ease – at this stage we would expect things to be getting better month-by-month. Even at times like these, there are always opportunities out there for jobseekers. But businesses are still very worried about the overall outlook for the economy, and while some are hiring, many are having to make tough decisions around laying people off.“It’s too early to tell how quickly the economy will recover, but there are steps the government can take to keep firms hiring and boost growth – including a more flexible skills system and a reduction in the government’s payroll tax (National Insurance) to reduce the cost of hiring."Equally, it’s vital that we secure a good Brexit trade deal and deliver a workable immigration system on time to build up confidence and business investment here in the UK.”

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Read more news and views from David Sapsted.

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