Coronavirus: Private sector plummets at record pace in first quarter

Private sector growth in the UK continue to slump during the pandemic. Credit: Getty

Private sector activity fell at the fastest pace since 2003 in the quarter to May, according to CBI growth measures.

The indicator, which is based on surveys of 1,033 UK companies, showed a record decline across services, distribution and manufacturing.

The biggest drop was in distribution which fell from -13% to -54%, followed by services which plummeted from -31% to -68%.

Manufacturing also declined further from -21% to -54%.

Expectations for the quarter ahead are for a similarly steep decline, signalling that no sector has escaped the significant fallout from the COVID-19 crisis.

The CBI survey also revealed more than half of firms have temporarily laid off staff with around one in six doing so permanently. This is a slight increase from 13% in April up to 17% in May.

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Two thirds of firms reported coronavirus having a significantly negative impact on domestic sales and 42% of firms remain in a state of total shutdown.

Shipping delays and shortages of materials and goods have eased slightly, while those reporting increased cost pressures has risen to 40% from 35%.

The number of firms reporting a hit to productivity and capacity constraints remains stable.

Government support packages appear to be making a difference as cash flow problems have fallen slightly from 79% to 68% as have the number of firms facing difficulties meeting tax liabilities.

But the amount of companies facing constraints on the availability of external finance remains broadly similar, at around one third.

Alpesh Paleja, CBI lead economist, said: “The continued impact of COVID-19 on economic activity is plain for all to see. While the unprecedented support from monetary and fiscal policy is very welcome, the grim reality of any crisis is that not every firm and job can be saved.

“With lockdown restrictions easing, ensuring people can return to work safely and gradually remains vitally important, with progress resting on the successful interaction between the new test and trace service alongside increasing COVID-secure transport capacity," he continued.

“As we move through this crisis, the need for government, business and civil society to work together to help our economy recover quickly and sustainably grows ever stronger.”

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