Growth in business activity in the UK slowed in September, according to a closely watched survey that indicated a summer economic surge was at risk from new restrictions to curb coronavirus.
The IHS Markit/Cips UK flash, or interim, composite purchasing managers’ index for September fell to 55.7, from a 72-month high of 59.1 in August, as business leaders reported a fall in optimism and consumer confidence.
The flash reading, which combines survey results from business leaders in manufacturing and services, is based on 85 per cent of the usual monthly responses. Any reading above 50 indicates the majority of respondents reported an improvement compared with the previous month.
“The UK economy lost some of its bounce in September, as the initial rebound from Covid-19 lockdowns showed signs of fading,” said Chris Williamson, chief business economist at IHS Markit.
Though significantly improved from the survey-record low of 13.8 per cent in April, and signalling that private sector activity continued to increase, September’s flash reading represents slowing optimism after a summer of growing confidence.
Consumer spending rose sharply in July and August as people enjoyed a relaxation of restrictions, and the “eat out to help out” discount scheme encouraged people to buy meals in restaurants and cafés. But a rise in coronavirus cases and the end of the government incentive meant growth slowed again this month, prompting Bank of England governor Andrew Bailey to warn that the “harder yards are ahead of us”.
Survey results indicated that September’s slowdown had been particularly acute in the services sector, and noted that employment numbers continued to decrease at a sharp pace.
“The indication from the survey [is] that growth momentum is quickly lost when policy support is withdrawn,” Mr Williamson said, adding: “[This] raises fears that growth could fade further as we head into the winter months, especially as lockdown measures are tightened further.”
The proportion of companies expecting a rise in business activity over the next 12 months continued to exceed those forecasting a contraction. But the level of optimism faded for the second consecutive month and was the lowest since May.