UK service activity stabilises in February

According to the report from IHS Markit / CIPS, February data indicated only a fractional decline in UK private sector output, which contrasted with the sharp reduction seen at the start of the national lockdown in January. This largely reflected a near-stabilisation in service activity during the latest survey period. Manufacturing production continued to expand in February, but the rate of growth was only marginal and the weakest since the recovery began in June 2020. Manufacturing companies often cited severe supply chain disruptions as a factor holding back production volumes. This was attributed to international shipping delays, strong worldwide demand for raw materials and Brexit-related trade frictions. Around 58% of the survey panel reported longer delivery times from suppliers, while only 2% saw an improvement in February. The scale of the downturn in vendor performance was the second-largest since the survey began in 1992 (exceeded only by those seen in April 2020).

At 49.8 in February, up from 41.2 in January, the headline seasonally adjusted UK Composite Output Index was close to the 50.0 no-change threshold. As a result, the flash reading in February – which is based on approximately 85% of usual monthly replies – signalled broadly stable levels of UK private sector output in comparison to those seen during January.

Service sector activity remained severely impacted by the coronavirus disease 2019 (COVID-19) pandemic in February, with output levels suppressed due to tight restrictions on travel, leisure and hospitality. Moreover, some manufacturers commented on weaker sales volumes due to temporary closures among clients in the consumer services sector, especially hospitality businesses.