UK private sector growth at four-month low

According to the report from IHS Markit / CIPS, data signalled a sharp slowdown in business activity growth across the UK private sector. The speed of recovery was the weakest since March, with survey respondents widely reporting staff and raw material shortages due to the pandemic. Concerns about the loss of momentum contributed to the lowest degree of optimism towards the business outlook for nine months.

At 57.7 in July, the headline seasonally Flash UK Composite Output Index registered above the 50.0 no change value for the fifth consecutive month. However, the latest reading was down from 62.2 in June and the lowest since the easing of lockdown restrictions began during March.

Around 32% of the survey panel indicated a rise in business activity during July, compared to 16% that signalled a decline. Where growth was reported, this was attributed to looser pandemic restrictions, a boost to consumer spending from staycations, rising demand for business services, and strong order books in the manufacturing sector. Those signalling a drop in output mostly commented on severe shortages of raw materials and the impact of COVID-19 isolation on staff availability (some also cited extended absences as employees took up unused holidays).

Disruptions to business operations among clients contributed to weaker new order growth across the UK private sector in July. The latest rise in new work was the slowest in the current five-month period of expansion. Some firms cited a drop in business and consumer confidence due to the pandemic situation, while others continued to report Brexit-related difficulties with export sales. 

UK private sector firms remain optimistic overall about their prospects for business activity growth in the coming 12 months. That said, the degree of confidence dropped to its lowest since October 2020. Survey respondents reported concerns about the enduring impact of the pandemic, especially in relation to staff availability, while some manufacturers noted a natural slowdown as customers had brought forward orders due to supply shortages.