The UK’s services sector returned to growth in July, with activity hitting its fastest pace since 2015.
A survey by analysts at IHS Markit found that the purchasing managers’ index (PMI) reading hit 56.5 in July. This was a small increase from June’s 47.1 figure and sharply higher than April’s record low of 13.4.
The services sector includes finance, law, retail, engineering, and consulting. And UK services account for around 80% of our economic output.
PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, and anything below means contraction.
While the index has climbed month-on-month since April, July is the first month the sector has hit its own criteria for growth.
Some 38% of respondents to the IHS Markit survey said they had seen business activity increase in July. And some 24% experienced a decline. The growth figures coincide with the UK’s tactics to ease coronavirus restrictions. As businesses have reopened stocks have been replenished, orders resumed and paused projects restarted.
PMIs measure the rate of change, but this rapid hike in July activity does not mean that the UK services sector has recovered from the impact of the crisis, more that output has simply risen from extremely low numbers in April.
Our conversations here at ConeX match the IHS Markit data. Across the South West, businesses have put additional measures in place to minimise the risk of staff exposure to the virus. And we’re seeing a renewed vigour to push projects forward.
“I can see nothing but positivity across the South West. The UK services sector is the foundation of a lot of UK industry - because businesses depend on us to run their own businesses successfully. I can see orders are being taken and supply chains replenished. People are taking huge delight in reestablishing connections after weeks or months in isolation or away from their business.
It will take a long time for production to reach pre-pandemic levels, but the news here in Cornwall and the South West is positive and we move into August from a position of optimism, says founder and Managing Director, Sam Baynham.
July’s positive data shows the fastest increase in business activity for five years, which also indicated a wider recovery across the manufacturing sector.
New business volumes have increased for the first time in five months, but respondents to the IHS Markit survey also pointed to cancellations and “subdued” demand. Hyper-local data is not yet available, but across the UK, businesses and households are choosing to reduce non-essential spending.
Manufacturing is looking likely to become the driving force of the upturn in the economy after the current global situation has passed. Companies are looking for leaner processes and the naturally agile nature of businesses in the South West allows them to be in a potentially great position moving forward.
Ambitious local companies, who are open to collaboration and have the ability to adapt is creating a strong platform for the industry and will draw even bigger projects into the region.
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