The UK’s dominant services firms are on a hiring spree and reaping the dividends of tumbling oil prices as the economy’s recovery rebuilds momentum, industry watchers declared today.
The latest snapshot of the sector’s health from the Chartered Institute of Procurement & Supply showed services firms - ranging from IT and accountants to bar staff and hairdressers - claiming a clutch of new contracts.
Services firms are hiring at one of the fastest rates for 20 years and - together with upbeat signs from builders and manufacturers - Cips’ trio of surveys now suggests UK companies are hiring staff at a rate of around 70,000 a month.
Steep falls in oil prices since last summer have meanwhile pushed firms’ costs to the lowest level since 2009, offsetting demand for higher wages to clear backlogs and deal with new orders.
“With a sharp drop in oil prices still having an effect on overall input prices, this looks to be a very happy new year for the services sector and a boost for the UK economy,” Cips chief executive David Noble said.
The buoyant news came as forecasters Oxford Economics forecast that sliding oil prices will propel UK growth to 3% this year in the Institute for Fiscal Studies latest Green Budget - the strongest growth seen since Chancellor George Osborne took the reins of the economy. As well as lowering costs for business, oil-driven low inflation will be a boon for shoppers this year, with the Bank of England seen as unlikely to raise interest rates until 2016.
The Cips data suggests a 25th successive month of growth for services firms, which picked up the pace after a weak December. The overall activity index, where a score over 50 signals growth, accelerated from 55.8 to 57.2 in January.
Economists said that heralds an improvement for the wider economy in the current quarter after slowing to 0.5% in the final three months of 2014.
Deutsche Bank’s chief UK economist George Buckley said of the three Cips surveys: “Were this level to persist then it would be consistent with a run rate of GDP around 0.7% in the first quarter.”
In Europe the picture is more subdued as financial data firm Markit said the eurozone was on course for growth of just 0.3%. Private sector firms showed growth in Germany, Italy and Spain, but the downturn in France extended into a ninth month, it said.Reuse content