Since the start of the year, when all signs indicated a significant improvement in the economic situation in this country, businesses across the board began hiring again in order to be prepared for a post-recession boom period. While retailers remain cautious, and high street banks continue to close branches in an attempt to return to profitability, business confidence has reached the highest level in six years and that shows in the employment statistics of the construction and manufacturing industries.
Now the service sector has joined the employment rush and has grown at its fastest rate in two years according to figures released this week by Markit. The purchasing managers’ index has climbed to 56.9 in June, and with any figure above 50 demonstrating growth, this is certainly a positive result.
In turn, this performance has meant that forecasts for economic growth have been upped considerably claims Markit chief economist Chris Williamson.
He says; “The buoyant picture for June means the economy is on course to expand by at least 0.5 per cent in the second quarter, with more growth to come.
“New orders and job creation across all sectors are now rising at the fastest rates for almost six years, led by the vast services economy, boding well for robust growth momentum to be sustained as we move into the second half of the year.”
The sudden mass hiring in the services sector is largely due to the leap in demand reported by firms within the industry. As three quarters of the economy consists of such firms, it is fair to say that the drive towards overall economic recovery is being overwhelmingly led by the services sector.
However, British Chamber of Commerce chief economist David Kern has warned against complacency for even the most secure of service sector businesses, as any economic recovery still remains highly dependent on factors outside the UK. Issues such as the Eurozone crisis, where service and manufacturing output continues to show decline, and the US Federal Reserve’s decision to decrease the number of financial stimulation schemes it is currently operating.
Furthermore, recovery could be hampered within the UK thanks to large banking chains displaying a continuing reluctance to lend.
Mr Kern says; “I don’t believe that the economy is booming, but the figures confirm the recovery is under way.
“It would be wrong to say we can relax now – many small firms are still finding it difficult in getting finance on acceptable terms; there is a bottleneck.”
Yet with both consumer and business confidence at levels not seen since the recession took hold in 2008, and results from the retail, construction and manufacturing industries showing significant improvement from this time last year, the future certainly looks bright for UK business.
Do you think banks will loosen up their lending policies as the economy continues to improve, or has the banking crisis left such a strong impression that SMEs may find it difficult to access loans for some time?
