Services sector picks up – but still in decline

Restrictions on travel, leisure and hospitality due to the ongoing lockdown restrictions saw the UK’S allimportant services sector continue to shrink in February, according to new data.

The closely followed IHS Markit / CIPS Purchasing Managers Index (PMI) came in at 49.5 in February – anything below 50 is seen as a sector in decline – although it was a vast improvement on the eight-month low of 39.5 recorded in January.

There were some pockets of growth in technology and business services, the survey found, and staffing levels decreased at the slowest pace since the pandemic first hit employment numbers last March.

The continued furlough scheme, which has now been extended until September, softened the degree of job losses among consumer service providers and some businesses reported optimism as the vaccine rollout continues apace.

New business volumes fell only slightly during February.

Low demand was mainly due to a lack of sales opportunities and clients holding back to see how the pandemic played out, the survey found.

It added that difficulties continued to persist with the new trading arrangements with the EU continuing to have an impact on firms.

New work from abroad fell sharply with travel restrictions and additional paperwork also affecting exports, companies said.

There were also signs of inflation, with a sharp and accelerated increase in average cost burdens at service sector companies, primarily due to higher fuel bills and shipping costs.