Hopes rise of a V-shaped re­cov­ery

Busi­nesses grow at fastest pace for five years while re­bound in car sales fu­els op­ti­mism for the econ­omy

The Daily Telegraph - Business - - Front Page - By Tim Wal­lace, Han­nah Ut­t­ley, Alan Tovey and Ben Gart­side

BRI­TAIN’S cru­cial ser­vices sec­tor grew at its fastest pace for five years last month as cus­tomers rushed out to spend money, fu­elling hopes of a rapid “V-shaped” bounce­back.

Car sales also jumped as de­layed pur­chases of new ve­hi­cles were able to go ahead, while more bricks were bought as con­struc­tion sites ramped up work, and vis­its to shops rose in a sign of grow­ing con­sumer con­fi­dence.

Restau­rants, mean­while, re­ported soar­ing book­ings fol­low­ing the launch of a gov­ern­ment voucher scheme.

It will trig­ger fresh spec­u­la­tion over a V-shaped eco­nomic re­cov­ery, in which GDP bounces back af­ter what is likely to have been the coun­try’s steep­est re­ces­sion in cen­turies.

How­ever, com­pa­nies also warned that more re­dun­dan­cies lie ahead, in­di­cat­ing the re­cov­ery may yet stut­ter.

Ser­vices in­dus­try firms re­ported strong growth in IHS Markit’s pur­chas­ing man­agers’ in­dex (PMI) sur­vey, al­beit from a very low level.

The PMI rock­eted from 47.1 in June to a five-year high of 56.5 in July. Any­thing above 50 sig­nals ex­pan­sion.

PMI data sug­gests that GDP rose by 8pc in June and the same again in July, ac­cord­ing to Sa­muel Tombs at Pan­theon Macroe­co­nomics.

This huge surge is un­prece­dented in mod­ern times but comes af­ter lock­down cratered the econ­omy. Mr Tombs es­ti­mates that out­put is still 12pc be­low its pre-Covid peak.

There were also signs of a sharp rise in vis­its to shop­ping ar­eas since June, ac­cord­ing to data firm Spring­board, but num­bers are still 39.4pc be­low where they were a year ago.

Foot­fall should climb fur­ther this month due to the Gov­ern­ment’s “eat out to help out” sub­sidy scheme, with din­ers rac­ing to en­joy up to £10 off meals from Mon­day to Wed­nes­day.

At steak chain Hawksmoor, co­founder Will Beck­ett said there have been 15,500 book­ings over the du­ra­tion of the month-long dis­count. An­drei Luss­mann, of the Luss­manns group of restau­rants backed by in­vestor Luke John­son, said book­ings for Mon­day to Wed­nes­day are dou­ble the level they would be in nor­mal times.

Mean­while, new ve­hi­cle sales rose for the first time this year as mo­torists re­turned to car show­rooms, spark­ing an 11.3pc jump in reg­is­tra­tions last month com­pared to July 2019.

It was the first full month when deal­er­ships were open across the whole of the UK and comes af­ter a near-to­tal col­lapse of the mar­ket dur­ing lock­down.

The So­ci­ety of Mo­tor Man­u­fac­tur­ers and Traders said spe­cial of­fers had helped to boost de­mand as sell­ers rushed to off­load ex­cess stock.

But it also warned that reg­is­tra­tions are still down 41.9pc so far this year, equal to nearly 600,000 cars.

The trade body now pre­dicts that sales will fall 30pc in 2020, rep­re­sent­ing over £20bn of lost busi­ness.

The build­ing trade is also mak­ing a come­back. In June 2020, UK brick sales were 76.5pc higher than in May and more than five times higher than in April fol­low­ing the eas­ing of lock­down. This was still a third lower than last June, gov­ern­ment fig­ures show.

Noble Fran­cis, at the Con­struc­tion Prod­ucts As­so­ci­a­tion, said house build­ing is likely to re­cover fur­ther in com­ing months af­ter Chan­cel­lor Rishi Su­nak slashed stamp duty.

Growth also re­turned in the eu­ro­zone, with a ser­vices PMI of 54.7.

Re­tail sales in the area climbed back to their pre-virus lev­els in June.

New cars be­ing stored at the for­mer Rock­ing­ham Mo­tor Speed­way track in Corby, Northants

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