The UK economy posted its strongest growth in business activity for more than two decades in May as shoppers rushed to the high street and the lifting of lockdown measures accelerated Britain’s economic recovery.
The rebound in the manufacturing and services sectors followed a return to pre-pandemic levels of retail sales in April, according to figures published on Friday.
The IHS Markit flash purchasing managers index (PMI)– a closely watched barometer of economic activity – found that hotels, restaurants and other consumer-facing services reported the biggest upturn in demand this month, though improvements were reported across the board in all sectors, leading to the fastest growth since the composite PMI began in 1998.
Chris Williamson, chief business economist at IHS Markit, said the UK was enjoying an “unprecedented growth spurt” as the economy reopened, underlined by the survey also reporting a record level of business confidence. The PMI for May was 62, up from 60.7 the previous month, with any figure over 50 showing economic growth.
“Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade.
“Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade,” he said.
The consultancy Capital Economics said there was a sting in the tail for manufacturers, however, after delays to imports following a disorderly Brexit and the spread of Covid-19 across the world lengthened the delivery times for raw materials and key components, according to the PMI index.
Markit said: “Severe delays continued across global supply chains in May, as signalled by a steep lengthening of vendors’ delivery times. Goods producers responded by accumulating stocks of purchases for the first time in 2021.”
Higher transport bills that followed a rise in diesel prices in April and May, coupled with an increase in the price of copper and other metals, resulted in the fastest increase in overall purchasing costs since the index began in January 1992, added Markit.
The report followed official figures showing that people in Great Britain rushed back to the shops in April to stock up on clothing and footwear, driving a 9.2% surge in retail sales over the month.
With all non-essential retailers allowed to reopen from 12 April in England and Wales and from 26 April in Scotland, after an almost four-month shutdown, clothing and shoe shops enjoyed an increase in sales of almost 70% compared with March levels.
The Office for National Statistics said the boom in sales across all sectors of the retail industry meant the volume of goods bought in April was 10.6% higher than February 2020, before the impact of the Covid-19 pandemic.
Household goods, which have proved to be in strong demand over the last year as people have sought to improve their homes, grew more modestly, but the continuity in sales online kept volumes almost 20% higher than February 2020.
The rise in sales in bricks-and-mortar shops will cheer high-street retailers but comes too late for Debenhams, which shut its doors last weekend, and a host of other retailers that have either gone bust or shrunk their estate of shops in the last year.
Online sales fell in most sectors in April as people opted to visit newly reopened shops, but continue to make up about a third of all sales after a surge in activity during the pandemic.
Aled Patchett, head of retail and consumer goods at Lloyds Banking Group, said: “April was always likely to see a further surge in sales as stores reopened for the first time in months – with fashion retailers the ultimate beneficiaries of beer gardens reopening and the rule of six night out returning.
“The high street will be hopeful that the re-emergence of indoor hospitality this week continues to bring shoppers back out in force to accelerate its recovery into the summer.”
However, he warned that the presence of new Covid variants could push shoppers to rekindle online habits that have become dominant over the past 12 months.