The UK services sector remains in a slump as the coronavirus pandemic continues, according to the latest PMI. 

The IHS Markit/CIPS UK Services Purchasing Managers’ Index registered just 13.4 in April, down sharply from 34.5 in March, signalling a rapid decline in service sector output. Readings above 50 signal growth and those below indicate contraction.  Around 79% of survey respondents reported a drop in business activity in April, almost double the survey record set in March (43%).  Reduced activity volumes were overwhelmingly attributed to business closures, client shutdowns or shrinking sales due to a slump in non-essential spending.

The latest data signalled survey-record declines in new work, backlogs and employment across the service economy.

The small number of firms that reported new business growth mainly attributed it to online consumer spending, public sector contract awards and demand for services related to remote working.  Around half of those surveyed (49%) indicated a decline in payroll numbers linked to the use of the UK government’s job retention scheme.  However, service providers reported redundancies due to severe cash flow constraints, which could lead to additional job cuts among those currently placed on furlough if support was not extended through the coming months.

Duncan Brock, group director at CIPS, said: “The services sector reached a stasis in April as the engine of business was put to sleep and the flow of new customers was cut off amidst public health concerns.

“The PMI visibly shows cataclysmically low levels of domestic and export new orders, along with outstanding business, as companies simply shut up shop. Firms also resorted to quick redundancies to avoid bankruptcy or made use of the furlough scheme to suspend operations as job creation halted apart from some online operations or digitally-focused activity.

“Though a further downturn was anticipated after last month’s historically low figures, the scale of this fall is unnerving. A significant number of businesses in shutdown now may never reopen.

“Even with some movement in the lifting of restrictions on business activity, the UK economy is not a tap that can just be turned on. The flow of activity will take planning, government support and an end to the pandemic in sight to have a strong effect on the biggest driver in the UK economy.”

Posted by Charlie Hart in Procurement, Supply Chain

Source:  Supply Chain Management News