UK business activity bounces back in March

Business activity in the UK private sector returned to growth in March, thanks to a rebound in the services sector.

The growth was driven by the fastest increase in service activity since August 2020, according to the latest report from IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).

The headline seasonally adjusted IHS Markit/CIPS Flash UK Composite Output Index stood at 56.6 in March, up from 49.6 in February and above the crucial 50.0 mark, which indicates growth, for the first time in three months.

It was also the first time that service sector activity (56.8) outpaced manufacturing production growth (55.6) since the start of the pandemic.

“The surge in business activity is far stronger than any economists expected, according to Reuters polls, and hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown compared to the first,” commented Chris Williamson, chief business economist at IHS Markit.

“The encouraging readings on future expectations, job creation and new order inflows meanwhile all point to robust economic growth in the second quarter, especially if virus restrictions are lifted further.”

Williamson added, however, that there are still concerns over supply chain delays, a continued fall in exports and sharply rising prices, all of which are making life difficult for many companies.

And Covid-19 restrictions are likely to curb the overall pace of economic growth for some time to come, especially if there is a third wave of infections, he concluded.