UK companies see recovery gain speed in August but job cuts mount

UK industry has reported the fastest growth in almost seven years after being boosted by further easing of lockdown restrictions but companies are still rapidly shedding jobs, according to new data.

The IHS Markit/CIPS Flash UK composite purchasing managers’ index (PMI), a closely watched measure, hit 60.3 in August, from a reading of 57.1 in July.

Everything above 50 is considered growth.

The reading represents the fastest growth in private sector output since October 2013 and surpassed analysts’ expectations of 56.7.

Accelerated growth was driven by improvements in the manufacturing and service sectors since July, the survey said.

It reported flash readings of 61.6 for the manufacturing sector and 60.1 for the services sector.

Higher levels of private sector output were largely attributed to the reopening of large parts of the economy in July and August, resulting in a jump in business and consumer spending.

Tim Moore, economics director at IHS Markit, said: “The combined expansion of UK private sector output was the fastest for almost seven years, following sharp improvements in business and consumer spending from the lows seen in April.

“There were encouraging signs that customer-facing service providers have started to catch up with the rebound seen earlier this summer across the wider economy, with easing lockdown measures, staycations and the Eat Out To Help Out scheme all reported as factors supporting growth in August.”

Total volumes of new work expanded for the second month running, with the latest increase the fastest since July 2014, it said.

However, the figures also revealed that concerns about the speed and duration of the recovery resulted in sustained job cuts across the private sector.

Employment declined at an accelerated rate with lower payroll numbers driven by redundancy programmes as firms sought to reduce overheads ahead of the end of the furlough programme.

Duncan Brock, group director at CIPS, said: “With the fastest rise in activity in the private sector since October 2013, this shows an encouraging speed towards recovery which belies the fact there are still some dark forces at play.

“Rising inflation, the sustainability of the UK economy during a global pandemic and the poor employment figures means we’re not out of the woods yet.”