UK service sector growth hits seven-year high as Covid restrictions ease | Services sector

The unleashing of pent-up demand has given Britain’s service sector its fastest monthly growth in more than seven years despite some signs of a flattening-out of activity in the past week, two separate snapshots of the economy have shown.

In its monthly health check, IHS Markit/CIPS reported sharp increases in consumer and business spending as lockdown restrictions were eased.

Increased confidence that the government would be able to keep to its roadmap for opening up the economy meant employers were willing to take on staff, with jobs growth at its strongest since October 2015.

The IHS Markit/CIPS purchasing managers’ index – a guide to the overall state of a sector responsible for almost 80% of the UK’s national output – stood at 61.0 in April, up from 56.3 in March and above the flash estimate of 60.1 reported late last month. Any reading above 50 denotes that the sector is expanding.

Meanwhile, the weekly digest of economic data from the Office for National Statistics showed a rise in restaurant bookings, a decrease in retail footfall and a broadly unchanged picture for credit and debit card use.

Seated diner reservations last Saturday were 71% of their level on the comparable weekend two years ago, a nine percentage point rise on the previous week, the ONS said.

The number of shoppers on the high streets and in retail parks in the week ending 1 May was 74% of the level during the same week of 2019, a drop of two points on the previous week. With many businesses in the hospitality and leisure sector still affected by Covid-19 restrictions, the ONS said an estimated 3.3 million workers remained on furlough.

Tim Moore, economics director at IHS Markit, said: “The roadmap for reopening leisure, hospitality and other customer-facing activities resulted in a sharp increase in forward bookings and new project starts across the service sector. If the rebound in order books continues along its recent trajectory during the rest of the second quarter, then service sector output growth looks very likely to surpass the survey-record high seen back in April 1997.

“The successful vaccine rollout continued to underpin expectations of a strong recovery in the year ahead, with service providers responding by boosting employment and investment spending during April. Job creation was the strongest for five-and-a-half years and, for the first time since the start of the pandemic, there were reports citing staff shortages as a factor holding back growth.”