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UK economic recovery 'fading' even before new coronavirus restrictions

Tom Belger
·Finance and policy reporter
·3-min read

Watch: UK recovery 'fading' new lockdown rules imposed

The UK’s economic recovery has shown “signs of fading” in the past month even before the announcement of new coronavirus restrictions, according to a closely watched business survey.

Flash estimates for the purchasing managers’ index (PMI) survey for Britain’s manufacturing and services sectors — a bellwether survey on the state of the UK economy — showed activity losing momentum in September.

The number of firms reporting growth in activity came in at a three-month low, though it still remained firmly in positive territory. The headline composite figure for factories and services came in at 55.7, compared to 59.1 in August, on an index where 0 means every firm reports decline and 100 marks growth for all firms.

MANCHESTER, ENGLAND - MARCH 16: A Union flag flies in a garden overlooking Manchester on March 16, 2020 in Manchester, England. (Photo by Anthony Devlin/Getty Images)
PMI data for Britain’s manufacturing and services sectors showed activity losing momentum in September. Photo: Anthony Devlin/Getty Images

“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, which compiled the data.

“It was not surprising to see that the slowdown was especially acute in services, where the restaurant sector in particular saw demand fall sharply as the Eat Out to Help Out scheme was withdrawn.

“Demand for other consumer-facing services also stalled as companies struggled amid new measures introduced to fight rising infection rates and consumers often remained reluctant to spend.”

Watch: What is a V-shaped economic recovery?

READ MORE: Firms warn on ‘potentially fatal blow’ of new coronavirus restrictions

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), which co-releases the figures with IHS Markit, added: “The effects of COVID restrictions continued to suffocate the UK economy this month as some of the recent gains in the manufacturing and services sectors were lost, and supply chains continued to suffer bouts of instability with stock shortages and longer delivery times.”

It comes a day after UK business chiefs warned new coronavirus restrictions were a “potentially fatal blow” for many of Britain’s pubs, bars, cafes, restaurants and city centre firms.

UK prime minister Boris Johnson faced a barrage of warnings over the threat to firms, jobs and recovery on Tuesday after he unveiled measures for England including encouraging home-working again and a 10pm shutdown for hospitality venues.

Watch: Why business leaders are angry at the latest restrictions

Johnson also told parliament new restrictions could last “perhaps six months” as Britain struggles to contain the resurgent virus through other measures.

Six months would come as a “shock” to many firms, said the Confederation of British Industry’s (CBI) director-general Carolyn Fairbairn. She acknowledging government action to curb rising cases was necessary but saying it would come at a “serious price.”

Fairbairn called for a new job protection scheme to replace the furlough programme which ends in October, and permission for firms to defer VAT payments. Testing must also improve to get people back to work and restore confidence, she added.