UK business activity spikes but job losses accelerate
UK business activity grew rapidly in August as the country recovered from the coronavirus lockdown, but job losses in the private sector accelerated.
The IHS Markit/CIPS Composite Purchasing Managers’ Index (PMI), a monthly gauge of activity in services and manufacturing companies, rose to a six-year high of 59.1 from 57.0 in July.
Still, that was revised down from a preliminary flash reading of 60.3, hinting at a weaker end to activity last month.
The survey’s index of employment declined for the first time in three months – chiming with widespread reports of layoffs from major employers grappling with the hit from the pandemic.
There are worries that the close of the government’s furlough scheme at the end of October could lead to widespread job losses.
Chris Williamson, chief business economist at IHS Markit, said companies’ ability to cope with the withdrawal of economic support measures like the furlough programme was now the “burning question”.
The government’s job retention scheme has supported almost 10 million jobs in total since its launch in April.
“Worryingly, many companies are already preparing for tougher times ahead, notably via further fierce job cutting,” Williamson said.
“Policymakers face a huge challenge in sustaining this recovery and avoiding a ‘bounce and fade’ scenario.”
The services PMI jumped in August as consumer spending increased following the end of lockdown.
The seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index registered 58.8 in August, up from 56.5 in July.
The latest reading was much higher than the average in the second quarter (29.8) and signalled the fastest pace of output growth since April 2015
Higher levels of output were primarily attributed to the reopening of the UK economy after the coronavirus lockdown in the second quarter.
Survey respondents noted a strong recovery in domestic consumer spending.
Higher volumes of business activity were linked to a post-lockdown bounce in both business and consumer spending during August, the survey said.
However, the rate of job shedding across the service sector was the
steepest since May.