UK business activity returned to growth in March, powered by stronger consumer confidence and rebounding sales ahead of a planned lifting of the Covid-19 lockdown, a survey showed.
The initial reading for the IHS Markit/CIPS UK composite purchasing managers’ index jumped to 56.6 from 49.6 a month earlier. The increase was the fastest since August, supported by the first rise in new orders since September. The total figure was well ahead of the 50 mark that indicates no growth.
Services drove the improvement with a forecast-beating reading of 56.8, up from 49.5 in February as the UK’s dominant sector returned to expansion. Analysts had on average expected a score of 51. Manufacturing also outstripped expectations with a score of 57.9, up from 55.1.
March was the first time services outpaced manufacturing. The trend was supported by a surge in demand for residential property services, fuelled by a sharp rise in house sales during the Chancellor’s stamp duty holiday for the first £500,000 of a purchase.
The survey was conducted after Boris Johnson announced plans for a phased reopening of the UK economy on 22 February with the aim of lifting all restrictions by 21 June. Britain’s successful vaccine programme and falling death and infection rates underpinned the plan, which remains in place.
Chris Williamson, IHS Markit’s chief business economist, said: “The UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August as children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence.”
Companies reported new orders on a scale exceeded only once in almost four years, and business expectations for the year ahead surged to the highest since comparable data were first available in 2012. Employment rose for the first time since the pandemic struck as firms hired workers to respond to inflows of work and the brighter outlook.
Williamson said the results suggested the economy would only contract mildly in the first quarter of the year with business holding up much better than in the first Covid-19 lockdown.
“Worries persist though, especially in relation to near-record supply chain delays, a continued fall in exports and sharply rising prices, all of which are making life difficult for many companies,” Williamson said.