Growth in Britain’s dominant service sector has slowed to its weakest level since March after businesses were hit last month by a triple hit of bottlenecks, self-insulated workers and a less generous tax break for home buyers.
The latest monthly health check of UK utility companies, which make up just under 80% of the economy, found that costs rose at their fastest pace in at least 25 years in July, and expressed concern that The best of the UK’s economic recovery from the winter lockdown restrictions may be over.
The report from IHS Markit and the Chartered Institute of Procurement & Supply said companies were struggling with supply chain delays and worker shortages exacerbated by “pingdemic,” self-isolating instructions that have been executing more than 500,000. per week.
IHS Markit / Cips said the reduction in the threshold at which stamp duty is paid on home purchases from £ 500,000 to £ 250,000 in England and Northern Ireland at the end of June was also a factor in slowing growth. of the activity to a minimum of four months. .
The purchasing managers index for July came in at 59.6, down from 62.4 in June, well above the 50-point level that marks whether activity is increasing or decreasing.
IHS Markit / Cips said the final PMI was stronger than the preliminary estimate of 57.8 for July, which was released before all the information for the month was available and therefore did not fully reflect the impact of the lifting of restrictions. July 19. The flash estimate data only includes the period up to July 21.
Tim Moore, chief economics officer at IHS Markit, which compiles the survey, said: “July data illustrates that the speed of recovery in the UK economy has slowed compared to the second quarter of 2021. More companies are experimenting. growth constraints due to labor and material shortages, while on the demand side we have already seen the peak phase of pent-up consumer spending. “
With some members of the Bank of England’s monetary policy committee beginning to worry about inflation, the survey showed mounting pressures on prices. The committee will raise its near-term inflation forecast when it meets Thursday, but the city considers a tougher policy stance unlikely, either by raising interest rates or stopping bond purchases through Threadneedle’s quantitative easing program. Street.
IHS Markit / Cips said that staffing difficulties increased wages and contributed to the fastest rise in overall input costs since its survey was first published in July 1996. Prices charged by companies in the manufacturing sector services also increased to the fastest on record.
The report said backlogs increased for the fifth month in a row and many companies responding to the survey reported staff shortages due to coronavirus isolation rules.
Similar issues were highlighted in the manufacturing PMI released earlier this week.
Duncan Brock, group director for the Cips, said: “We suspect that the best of the post-pandemic recovery may be behind us, especially if higher entertainment and hospitality costs diminish the appetite for consumer spending.”
Supply chain disruptions and labor shortages also hit the eurozone last month, where general business activity expanded at its fastest pace in 15 years. The final composite PMI for the eurozone stood at 60.2 last month, slightly lower than the preliminary estimate of 60.6 but higher than June’s 59.5, and the highest since the run-up to the financial crisis. from 2007-08.
George is Digismak’s reported cum editor with 13 years of experience in Journalism