Services recover from ‘beast from the east’ battering

Growth in the UK’s all-important services sector picked up again in April after a poor showing the previous month because of a wintry storm dubbed ‘The Beast from the East’.

Purchasing food
The Markit/CIPS services purchasing managers’ index (PMI) for the sector recorded a reading of 52.8 in April, up from 51.7 in March but still slightly below analysts’ expectations for 53.5.

Growth continues at a slower rate

The index, in which any reading above 50 indicates growth, followed publication of the PMI for construction, which showed an April reading of 52.5 last month, up from 47 in March – another low attributed to the snow and freezing temperatures.The PMI for Britain’s manufacturing companies, also published this week, stood at 53.9, the lowest growth rate for 17 months amid a slowdown in new business orders.Lee Hopley, chief economist at the manufacturers’ organisation EEF, said, “The further slowdown in the rate of expansion in manufacturing activity suggests that the weaker official data seen last week wasn’t a temporary aberration. “Before anyone hits the panic button, however, the UK survey is still pointing to expansion across manufacturing, a trend that had been in place for the best part of two years. This should nevertheless focus government minds on the next steps on implementing its industrial strategy, which is crucial in sustaining competitiveness and growth over the longer term.” 
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Chris Williamson, chief business economist at IHS Markit, said the services PMI increased “signs that the rate of economic growth remained disappointingly subdued at the start of the second quarter”.He added, “The three PMI surveys collectively showed only a muted rebound in business activity after being disrupted by heavy snowfall in March, failing to regain February’s pace of growth to suggest that the underlying performance of the economy has continued to deteriorate.”

Service sector employment levels

The report said that hiring across the services sector was the weakest since March last year, with a tight labour market and higher wages holding back recruitment. However, business confidence in the sector improved with a majority of companies optimistic that activity would increase over the rest of the year.James Smith, an ING economist at ING, commented, “As the Bank of England tries to gauge how much of the recent dip in economic activity was temporary, the message from the latest services PMI is that the snow wasn’t entirely to blame.“The accompanying press release makes it clear that much of this has to do with weak consumer demand – and we don’t expect these difficulties to fade rapidly.”Also published on Thursday was the latest SME Trends Survey from the Confederation of British Industry, which showed that growth in domestic orders for small and medium-sized manufacturers stalled in the quarter to May, while export orders growth was the strongest on record.Alpesh Paleja, CBI principal economist, said, “The latest survey brings mixed fortunes. Export orders continue to go great guns, with SME manufacturers making the most of a lower pound and robust global growth, and output growth has continued to hold its own.“But demand at home has flat-lined this quarter and firms expect worse over the next three months, with exports orders growth also set to peter out. Cost pressures remain high, and investment plans have deteriorated.“With challenges ahead both at home and abroad, it’s important that businesses have the certainty that they need to invest and grow. As a result, building on recent progress in agreeing a transition period, other hurdles on the Brexit path need to be cleared swiftly and in the same spirit of compromise.”For related news and features, visit our Enterprise section. Find out more about our upcoming Relocate AwardsRelocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory

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