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Service sector recovery is slow as demand for staff remains high!

IHS Markit and CIPS UK have released their UK Business Outlook Report for July 2021. This report reveals how confident UK businesses in the service sector feel about their prospects for the next 12 months.

Please find below some of the key highlights from the report:

  • Service sector recovery slows again in July
  • Inflationary pressures hit new record high
  • Weakest rise in business activity since March
  • Strongest input cost inflation in 25 years of data collection
  • Staff shortages constrain business capacity and recruitment

Commenting on the report, Tim Moore, Economics Director at IHS Markit said: “July data illustrates that recovery speed across the UK economy has slowed in comparison to the second quarter of 2021. More businesses are experiencing growth constraints from supply shortages of labour and materials, while on the demand side we’ve already seen the peak phase of pent up consumer spending. The full easing of pandemic restrictions appears to have helped limit the overall loss of momentum towards the end of July. At 59.6, the PMI reading for services output was much stronger than our earlier ‘flash’ figure of 57.8 in July, largely due to the final index covering an extra five days since ‘freedom day’. Any re-acceleration of growth in August looks unlikely, however, as new orders increased at a much-reduced pace at the start of the third quarter. Moreover, business expectations softened again during July, with UK firms the least optimistic about the growth outlook since January. Survey respondents cited worries about recruiting staff to meet business expansion plans and some suggested that escalating costs would hinder the recovery.”

Duncan Brock, Group Director at CIPS, also said: “With new orders at their weakest since February, demand in the services sector appears to be waning along with business optimism as supply and staff constraints impacted on activity last month. Unfilled vacancies due to skills shortages and low stocks at suppliers meant further gains were obstructed and backlogs of work increased. Adding to capacity pressures, the relentless rise in input cost inflation to its highest for a quarter of a century meant businesses were paying more for wages, transport and food, and consumers were beginning to bear the brunt with onward price inflation the most elevated since the survey began in 1996.”

Also commenting on the report, Andrew Brindley, Director at AJ Recruitment said: “This month’s service sector report shows how hard the pandemic has hit the economy and is continuing to do so. Over the past few months, the hundreds of thousands of people who’ve been ‘pinged’ on the NHS track and trace app and told to self-isolate has really impacted sectors and their ability to operate as the economy reopened. Business groups had a collective sigh of relief when the government announced that it would be making changes to the app to reduce this impact. We have seen similar levels of demand from our customers over this period for temporary and permanent positions when we would normally see demand tail off as we hit the holiday season. There is however good news ahead, after reading the report nearly 60% of organisations expect to grow at a faster pace in the second half of the year.”

This report allows you to benchmark your business against the backdrop of the wider economy. I hope you find it useful to help you measure and understand where Social Care as a sector sits against the wider picture.

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If you would like to discuss the consultation, or about how we can collaborate, please let us know. To get in touch, either call 03305 552233 or email recruitment@ajrecruitment.com.

As a specialist, family-run recruitment business, we provide a proactive and consultative approach to recruitment within Social Care. We help organisations to target issues such as continuity of staffing, reducing spend where you have a high volume of agency usage, and supporting those who have specific talent requirements or are in hard-to-fill locations. We can help with any immediate staffing requirements or longer-term recruitment projects to ultimately save you time and money on agency spend.

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