UK business activity growth hits seven-and-a-half year high in April

According to the report from IHS Markit/CIPS, the performance of the UK service sector strengthened again during April, driven by sharp increases in business and consumer spending. Survey respondents widely attributed the improvement in demand to looser pandemic restrictions and high levels of optimism regarding the near-term economic outlook. Confidence in the sustainability of the recovery was also reflected in greater staff hiring, with employment growth accelerating to its fastest since October 2015.

Adjusted for seasonal influences, the headline UK Services PMI Business Activity Index registered 61.0 in April, up from 56.3 in March and the highest since October 2013. The final reading was also above the earlier 'flash' estimate for April (60.1).

Service providers noted that the roadmap for easing COVID-19 restrictions across the UK had been a key factor helping to boost activity. There was a direct boost to output from the reopening of some customer-facing parts of the economy in April, as well as a positive impact on the rest of the service sector due to improving business and consumer confidence.

New order volumes increased for the second month running in April and the rate of expansion was the steepest since December 2013. Service providers reported that the improved pandemic situation and strong optimism towards the UK economic outlook had led to a sharp rise in forward bookings and new projects starts.

Looking ahead, service sector firms overwhelmingly anticipate an upturn in business activity during the next 12 months. Around 65% of the survey panel forecast an expansion, while only 7% predict a decline. The resulting business expectations index was only fractionally lower than March's 14-year peak.