UK services sector growth slowed by coronavirus
Growth in the UK services sector slowed in February as coronavirus led to cancelled bookings and delayed projects, a survey has shown.
Nonetheless, the sector had its second-best month since September 2018 as a rise in consumer confidence after the December General Election and Britain’s exit from the EU led to a rebound in domestic demand.
The IHS Markit/Cips purchasing managers’ index (PMI) came in at 53.2 in February, down from 53.9 in January. A score of above 50 indicates expansion.
February was the second consecutive month of expansion for UK services after a subdued 2019 for the sector, when the Brexit impasse and a global slowdown took a toll.
Chris Williamson, chief business economist at data firm IHS Markit said the picture was mixed. “The post-election rebound in service sector growth lost some of its bounce in February, in part due to coronavirus related disruptions,” he said.
The survey, which asks companies’ purchasing managers about the state of business, showed there was a fall in orders from abroad as coronavirus disrupted demand and supply chains around the world.
Coronavirus – now known as Covid-19 – emerged in China in December and has since spread to more than 60 countries, killing more than 3,000 people.
The outbreak has led to whole swathes of countries such as China and Italy being put on lock-down, stopping people spending or going to work and thus damaging the economy.
Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply, said new orders in the UK services sector in February “were largely driven by domestic sales, as some EU clients continued to sidestep business with the UK because of lingering Brexit concerns”.
He said the virus “also affected orders from the Asia region, putting a dampener on new business and subsequently levels of job creation”.
Despite this, business optimism across the UK services sector reached its highest level since 2015 as firms were cheered by lower political uncertainty and increased domestic demand.
Prime Minister Boris Johnson’s emphatic election victory in December ended the deadlock over Brexit. This cheered consumers and firms who were frustrated with the uncertainty, even if many have doubts about the project as a whole.
Brock cautioned that coronavirus could yet do more damage to the sector and economy, however. “As shipments from China are held back, and ports closed, the consequences for supply chains are just beginning,” he said.