UK service industries are starting to show signs of a two speed recovery, David Noble, chief executive of the Chartered Institute of Purchasing & Supply, has warned.
“While on the surface, the recovery of the UK services sector continued at a steady pace, a look under the bonnet reveals some worrying signs and raises concerns about the prospect of a double-dip recession.
‘It’s worrying that we’re starting to see a two speed recovery, where business-facing service providers are faring much better than consumer-facing firms,” he said. “The impending public sector spending cuts and likely tax rises will no doubt hit both of these areas hard.”
And, he warned: “Most alarming was the slower growth in new business which, coupled with ongoing input price inflation drove a number of firms to reduce staff for the first time in three months. What’s more, some purchasing managers attributed any positive growth spurts to a rebound in activity following the disruptive volcanic ash chaos.”
The latest Markit/CIPS UK services purchasing managers’ index shows activity rising for a thirteenth successive month. New business continued to increase, it said, but at the slowest rate since last August as market uncertainties undermined client demand, while there was a return to job shedding as companies focused on cost control.
The headline seasonally adjusted Business Activity Index recorded 55.4 in May, slightly higher than April’s 55.3. Although levels of incoming new business continued to rise during May, the rate of growth weakened further from February’s two-and-a-half year peak.