Coronavirus: UK economic recovery stumbles as business growth slips
The UK economy’s recovery stumbled in October, according to a new survey, with services sector growth slowing considerably amid rising coronavirus cases and new government measures.
The IHS Markit/Cips preliminary purchasing managers’ index (PMI), a gauge of the private sector’s health, fell sharply to 52.9 in October from September’s reading of 56.5.
A score above 50 indicates expansion. But the sharp slowdown in growth will worry policymakers given that more restrictions have been put in place since the survey of companies’ purchasing managers was taken.
The UK is battling a steep rise in coronavirus cases. There were 21,242 new cases of coronavirus yesterday, up 2,262 from the previous week. Deaths rose to 189, up 51 from a week earlier.
In response to the surge, the government has put parts of the country under strict “Tier 3” restrictions which limit mixing and force some hospitality businesses to shut.
In October, manufacturing production grew strongly. Survey respondents pointed to pent up demand, a frothy housing market and the restart of delayed work projects.
‘Not looking good’ for UK economy
But growth in the services sector was held back by renewed Covid restrictions, IHS Markit said. It also said the hospitality and tourism sector remained weak.
The survey indicated a “steep fall” in employment. There were deep job cuts in both manufacturing and services, as firms cut costs to adapt to the new climate.
“Not surprisingly the weakening is most pronounced in the hospitality and transport sectors, as firms reported falling demand due to renewed lockdown measures,” said Chris Williamson, chief business economist at IHS Markit.
Williamson said the slowdown would have been “even more pronounced” if companies had not benefited from higher exports.
“It’s not looking good,” said Paul Dales, chief UK economist at Capital Economics. He cautioned against “reading too much into” the solid rise in September retail figures published today.
“The renewed downward trend in the PMIs provides a better sense of what’s happening to the overall economy.”