Business Planning

Services sector reports growth in the face of Brexit uncertainty?

Letitia Booty | 5 September 2016 | 8 years ago

The UK services sector makes up nearly 80 per cent of the economy
The UK services sector makes up nearly 80 per cent of the economy
The UK services sector has seen a rise in activity in August following a record drop in July thought to be a result of disruption related to the EU referendum.

This is according to PMI survey data from HIS Markit and CIPS, which has reported that the month-on-month gain in August was the largest observed over the 20-year survey history.

The renewed expansion of total activity was supported by a resumption in growth of new business in August. New work rose at the fastest pace in four months, having previously fallen at the strongest rate since March 2009 in July.

Companies linked greater demand to new clients, higher export business linked to the weak pound, higher domestic tourism and returning confidence following initial disruption related to the Brexit vote.

New business growth was weaker than the long run survey trend, but sufficiently strong to generate a rise in outstanding work at services providers for the first time in five months. Job creation in the services sector resumed in August following a pause in July.

Senior sales trader at Foenix Partners, Alex Lydall, said: Mark Carney and his Bank of England colleagues could be excused for murmuring what Brexit this morning, after a spectacular print for the services sector, with the increase from July’s figure being the largest month-on-month gain since the 20-year survey began.

bearing in mind the services sector is such a crucial part of the UK economy, the bullish print only continues the pattern that the manufacturing sector started last week, giving August figures a strong outlook in a month many worried the onset of the referendum result may weigh on the UK. With markets appearing to be dealing effectively in the immediate aftermath of the Brexit, the short-term sterling outlook could perhaps not be a bleak as many traders? anticipated just a few weeks ago.

However, for all this optimism it must be stated that business activity in the service sector remains weak by historical standards, and according to HIS Markit chief business economist, Chris Williamson, much hinges on the September data to see whether the economy contracts or ekes out modest growth.

He said: It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate. Many companies are seeing business return to normal either simply by customer confidence rising or a stoic determination to ‘buck Brexit’ and carry on regardless.

uncertainty has certainly eased considerably, helped by the swift settling-in of a new government and central bank stimulus. However, although improving on July’s seven-year low, business confidence is still at one of its lowest levels seen over the past four years. Many companies remain worried about the outlook and how the economy will fare in the event of Brexit, suggesting that political and economic uncertainty is likely to prevail in coming months, subduing growth.

Related Topics

How Businesses Can Save on Their Energy Costs This Winter
28 September 2023

How Businesses Can Save on Their Energy Costs This Winter

Read More →
The Importance of Data Analytics in Making Informed Business Decisions
14 September 2023

The Importance of Data Analytics in Making Informed Business Decisions

Read More →
How to Write a Business Plan That Investors Will Love
13 September 2023

How to Write a Business Plan That Investors Will Love

Read More →
Performance Appraisals Reimagined, How to Modernise Your HR Reviews
4 September 2023

Performance Appraisals Reimagined, How to Modernise Your HR Reviews

Read More →
Embracing Sustainability: Eco-Friendly Practices for Businesses
1 September 2023

Embracing Sustainability: Eco-Friendly Practices for Businesses

Read More →
Eco-Friendly Sustainable Business Practices
8 August 2023

Eco-Friendly Sustainable Business Practices

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter