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Business confidence hits 14-month high
UK service sector growth accelerated to its highest level since March 2011 during June as incoming new business rose at a rate unmatched for six years. according to research by Markit and the CIPS.
The sharp increase in new business led to a marked rise in backlogs of work, and encouraged companies to take on additional staff to the strongest degree since August 2007.
Confidence regarding future activity was also retained, with expectations at their highest for 14 months. However, margins remained under some pressure as strong competition prevented companies from fully passing on higher cost burdens.
After accounting for seasonal factors, the headline Business Activity Index recorded 56.9 in June, up from May’s 54.9 and the highest reading for 27 months. Growth has now been recorded for six successive survey periods, and has continually improved throughout this sequence.
The principal driver of increased business activity during June was a rise in sales volumes. Panellists commented that market demand had improved inline with growing business confidence. Amid reports of increased marketing and new product releases, better weather also helped fuel new business growth which, in June, was the strongest registered by the survey for six years.
Capacity came under pressure from the sharp gains in new business during June. This was highlighted by a solid rise in backlogs of work, with growth the strongest seen since August 2007.
Backlogs rose in spite of the sharpest increase in staffing levels for just under six years. Extra staff were mainly taken on to service growing current workloads, with some companies also recruiting in anticipation of further growth.
