UK bouncing back as fears of recession fade

BRITAIN’S dominant services sector bounced back to growth last month – a sign that the economy is showing resilience despite fears of a downturn.

A business survey by s&P Global showed a reading of 53.5 in February, the first time it has been above the 50-mark that separates growth from contraction in six months.

It comes after official figures showed the UK narrowly avoided recession at the end of last year and the Bank of England predicted a downturn will be shallower and shorter than previously thought.

UK households and firms are being squeezed by double digit inflation and rising interest rates. But the purchasing managers’ index (PMI) reading for services, which covers four-fifths of the economy from pubs and hotels to law firms and accountants, was the strongest for eight months.

It pointed to signs of a turnaround in confidence as political uncertainty ebbs and hopes rise that inflation pressures will ease. sentiment was also boosted by ‘hopes that peak interest rates are on the horizon’, said tim Moore, economics director at s&P Global Market Intelligence.

But businesses were held back from hiring as they battle soaring wage bills and elevated energy costs.

A composite reading which takes in the manufacturing sector as well as services also showed signs of a bounce-back to an eight-month high. But Martin Beck, chief economic adviser to the EY Item club, warned: ‘Activity continues to face some serious headwinds, including high inflation, rising interest rates and tighter fiscal policy. the economy will struggle to grow over the next few quarters, although recession risks are receding.’

samuel tombs, at Pantheon Macroeconomics, said: ‘ It’s too soon to conclude that a recession has been avoided.’