Vaccine rollout boosts UK services, manufacturing

Government plans to ease pandemic restrictions in the coming months has led to a sharp rebound in the fortunes of both the service sector and manufacturing in the UK.

David Sapsted

26 March 2021

A 'flash' purchasing managers’ index from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) scored 56.6 for services in March and 55.6 for manufacturing in an index where any reading above 50 indicates growth.The reading for services, which account for more than three-quarters of the UK's GDP, was the highest since August, while the manufacturing figure had been unmatched for more than three years."The UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August as children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence," said Chris Williamson, chief business economist at IHS Markit."Companies reported an influx of new orders on a scale exceeded only once in almost four years, and business expectations for growth in the year ahead surged to the highest since comparable data were first available in 2012."However, Mr Williamson added that exports remained depressed amid supply chain issues, partly a consequent of the end of the Brexit transition period as well as the global downturn resulting from the pandemic.And he said: "Many consumer-facing companies, meanwhile, remain constrained by Covid-19 restrictions, which are likely to curb the overall pace of economic growth for some time to come, especially if we see a third wave of infections."Even so, the UK's service sector outperformed its European rivals with the IHS Markit flash PMI for the eurozone finding businesses were still being “constrained by the coronavirus disease, with social distancing restrictions leading to a seventh successive monthly fall in business activity”.The headline figure in the IHS Markit Eurozone Composite PMI rose from 48.8 in February to 52.5 last month, but services remained below the 50 mark at 48.8.

Meanwhile, new research among more than a thousand small and medium-sized enterprises (SMEs) in the UK found that the successful rollout of coronavirus vaccines had resulted in almost a fifth (19 per cent) now planning to recruit more staff.The survey, commissioned by Hitachi Capital Invoice Finance, also found that a further 19 per cent had decided to reverse redundancy decisions.Andy Dodd, managing director at Hitachi Capital Invoice Finance, said: “The UK is leading the way when it comes to vaccine rollout, and it’s great to see the success of the programme is translating into business confidence for hundreds and thousands of SMEs."Many employees up and down the country across a range of industries including hospitality and leisure, will be grateful for greater job security. The news that many businesses are now beginning to think about hiring new recruits is also a huge positive for the wider economy.”