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Private sector growth slows as post-COVID boost wears off

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Soho, London
A COVID-19 traffic restriction sign in Old Compton Street, Soho, London. Photo: Getty

Private sector activity continued to grow at an above-average pace in the three-months to September, however growth slowed compared with the previous month.

According to a monthly growth indicator from the Confederation of British Industry (CBI) September saw a net balance of 27% (down from 34%).

The slowdown was fairly broad-based, with growth softening in consumer services (6% from 30%), distribution (29% from 53%) and manufacturing (16% from 22%). 

The composite measure is based on responses from 576 firms between 25 August and 15 September.

Meanwhile, business & professional services firms reported a slight uptick in the pace of growth (39% from 32%).

Among the firms surveyed, 59% said they were facing labour shortages. Of those firms, 42% said they were raising pay for key roles within organisations to attract staff.

Around a quarter said they are readjusting operations (24%) or investing in tech/automation (23%).

CBI economists put the slowdown down to a mix of materials and labour shortages and supply chain disruption, calling for a "COBR-level" government and business taskforce to combat the issues and to "help keep the economy on track". 

The calls for a taskforce come as the UK faces rising costs filtering through to consumer goods. Supply chains have been in focus amid a shortage of HGV drivers to ferry goods around and more stringent border conditions following Brexit. 

Looking ahead, the survey found private sector activity is expected to expand at a steady pace in the three months to December (28%). 

Manufacturers expect growth to pick up (25%), while consumer services firms expect business volumes to fall slightly (-5%). Business and professional services firms (40%) and distribution firms (26%) anticipate a similar pace of growth to the three months to September.

Watch: Will interest rates stay low forever?

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