Yahoo Finance UK economy 'resilient' but job losses rising for seventh month in a row
Much of the UK economy has proved “resilient” despite rising coronavirus rates and lockdown restrictions in September, according to a closely watched business survey.
New figures show the services sector, which makes up around four-fifths of the economy from cafes to consultancy, continuing to grow but at a slower pace last month.
The latest purchasing managers’ index (PMI) figures for the UK’s services came in at 56.1. The pace of growth weakened from 58.8 in August, but remained high. Last month’s reading had been the highest since 2015.
The figures from data provider IHS Markit are based on a survey of firms, with readings above 50 showing the majority are expanding and below 50 showing most face a decline in activity.
Chris Williamson, chief business economist at IHS Markit, said: “The UK service sector showed encouraging resilience in September, with business activity continuing to grow solidly despite the government’s Eat Out to Help Out scheme being withdrawn.”
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Cuts to stamp duty taxes have boosted firms in or linked to residential property sales, according to the survey. Many firms continue to rebound from the easing of certain lockdown restrictions earlier this year, despite a growing wave of regional lockdowns and fresh curbs including a 10pm shutdown for hospitality venues.
Meanwhile a composite reading for both services and manufacturing showed strong growth of 56.5, down from a six-year high of 59.1 last month. Expansion among manufacturers outstripped services firms for a third month, however.
The experiences of services firms are also “uneven,” with gains mainly for those in business-to-business services. Firms more reliant on consumer spending and social contact such as hotels, restaurants and catering saw business levels decline, “exacerbated” by the withdrawal of government schemes and tighter COVID-19 curbs. Low international tourism numbers have added to many firms’ troubles.
The latest figures also show job numbers falling for a seventh month in a row across services and manufacturing, with private sector services jobs hit hardest.
"Once again job losses remained the black spot amidst these pockets of recovery," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which runs the survey alongside IHS Markit.
"Redundancies have replaced job hiring in an attempt to shield firms from rising input costs but these strategies will devastate local communities.”
It comes ahead of a major speech by UK chancellor Rishi Sunak at the virtual Conservative Party conference on Monday.
Sunak is expected to promise to “create, support and extend opportunity to as many people as I can.” but he will also say the “pain” of mounting job losses “only grows with each passing day,” according to reports.
The government has come under enormous pressure to do more to stave off job losses as the crisis drags on and the furlough scheme is wound down.
It promised £238m of new support for jobseekers on Monday. Support will include advice on growing sectors, CVs and interviews, according to the department for work and pensions (DWP). It will also be targeted at anyone out of work for more than three months.
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Analysis released by Labour on Monday suggests almost one million jobs could be at risk in areas under regional or local lockdowns.
The figures suggest 490,000 people remain on government-subsidised furlough leave in such areas, and another 480,000 are in areas on the government’s watch list for potential lockdowns.
The furlough scheme wage grants will run out this month, with fears a new job support scheme which replaces it is not generous enough to incentivise retaining staff.
