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UK services sector posts fastest growth since 2013 in April

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Companies reported that they saw a sharp increase in business and consumer spending last month. Photo: Andrew Milligan/PA via Getty
Companies reported that they saw a sharp increase in business and consumer spending last month. Photo: Andrew Milligan/PA via Getty

The UK services sector had its fastest growth in more than seven years in April as restrictions on the hospitality and retail sector lifted after doors had been closed for months.

According to IHS Market’s monthly purchasing managers index, the services sector rose 61.0 last month, from 56.3 in March, highlighting how the UK economy is recovering from the health crisis.

This beat an earlier flash estimate of 60.1, suggesting activity picked up towards the end of the month. Any score of above 50 indicates growth. The data were collected between 12 April and 28.

Companies reported that they saw a sharp increase in business and consumer spending last month. New projects and forward bookings also jumped, with new order volumes rising at their fastest rate since December 2013.

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Non-essential retailers reopened to in-store shoppers across the UK last month, and pubs and restaurants were permitted to serve customers outside. Indoor dining is set to resume in England on 17 May. 

Sales to overseas customers remained relatively subdued, but rose marginally, reflecting tight restrictions on international travel and hesitancy among clients due to the pandemic. This ended a 14-month period of decline.

The jump in service sector activity also helped to push total UK private sector growth to its highest level in over seven years.

According to IHS Market’s monthly purchasing managers index, the services sector rose 61.0 last month, from 56.3 in March, highlighting how the UK economy is recovering from the health crisis. Chart: IHS Markit, CIPS
According to IHS Market’s monthly purchasing managers index, the services sector rose 61.0 last month, from 56.3 in March, highlighting how the UK economy is recovering from the health crisis. Chart: IHS Markit, CIPS

Employment also climbed for the second month in a row, accelerating to its fastest since October 2015, as stronger demand encouraged job creation across the services sector in April.

Despite efforts to rebuild business capacity, backlogs of work rose at the steepest rate since March 2015, the survey showed.

“April data illustrates that a surge of pent up demand has started to flow through the UK economy following the loosening of pandemic restrictions,” Tim Moore, economics director at IHS Markit, said.

“The successful vaccine roll out continued to underpin expectations of a strong recovery in the year ahead, with service providers responding by boosting employment and investment spending during April.

He added: “Job creation was the strongest for five-and-a-half years and, for the first time since the start of the pandemic, there were reports citing staff shortages as a factor holding back growth.”

Read more: Scientists warn reopening UK too fast could spur third COVID wave

The UK economy suffered its biggest fall in GDP in more than 300 years last year, with a contraction of almost 10%. This was bigger than most other advanced economies and wiped out seven-years' worth of growth, taking the UK economy back to the size it was in 2013.

The IHS UK survey came as German factory orders jumped for the third month in a row. Industrial orders in the country rose 3% in March, ahead of forecast, thanks to a boost in domestic orders.

Demand within Germany increased by 4.9% month-on-month while foreign orders rose 1.6%.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: "This positive trend in recovery is likely to accelerate in the coming months, but stretched supply chains remain a sticking point, along with inflation potentially biting chunks out of wages and business margins, threatening to put a brake on this fast track to economic normality."

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