Business output across the UK rose for the third month in a row in July as the services sector continued to benefit from the easing of lockdown restrictions, but the pace of the UK’s economic recovery started to wane, according to consultancy BDO’s Output Index.
The index, which gives a snapshot of output in the manufacturing and services sectors by weighting macroeconomic data from the UK’s main business surveys, rose by 6.7 points to 73.2 in July. This compares to a more significant rise of 11.16 points in June, suggesting that the rate of economic recovery is starting to slow down. The index also remains a way short of the 95-point level that represents an annual expansion in output.
The consultancy suggested that the impact of coronavirus on the UK’s manufacturing sector dragged down an overall increase in business output. The manufacturing sector grew at just over half the pace in July compared to the previous month, with the sector’s reliance on international exports meaning that it has been adversely affected by the rising number of Covid-19 cases across the planet.
The reopening of pubs, restaurants and cafés at the start of last month which led consumers back to the high street helped drive growth in BDO’s Services Output Index, which rose by 6.81 points to 71.54 points in July.
“The latest data suggests we might be approaching a plateau in our economic recovery,” commented Kaley Crossthwaite, partner at BDO LLP. “While the reopening of the hospitality sector has provided a much-needed uplift, the ongoing capacity restraints caused by social distancing, as well as pressures on UK manufacturers imposed by weakened overseas demand, means this growth is likely to continue to slow.
“Support from the Coronavirus Job Retention Scheme has successfully insulated millions of workers from the worst impact of the economic downturn. But with this government support beginning to taper, it remains to be seen how resilient the jobs market can continue to be.”
The country is set to officially enter recession on Wednesday, when the Office for National Statistics will publish GDP figures for the April to June period.
Amid mounting concerns over the outlook for the jobs market, the BDO Employment Index fell for the fifth consecutive month, down 0.66 points to its lowest level since November 2016. BDO said that the relatively steady and small rate of decline suggests that government support has been broadly successful in retaining jobs so far.
Job losses continue to mount as the end of the Coronavirus Job Retention Scheme nears and companies are forced to take decisions whether to retain staff on furlough. Dixons Carphone and Hays Travel announced plans to cut hundreds of jobs last week, and thousands of British Airways staff are waiting to find out if they will be made redundant in the coming days. 1,100 jobs are at risk at Pizza Express and WH Smith is considering axing up to 1,500 of its staff as footfall in the high street struggles to return to its pre-Covid levels.
10th August 2020.
