Economic growth hits highest rate since June, survey suggests

February’s eight-month high came after January, which was the worst month for nearly a year.

Restaurants and other service businesses have recorded a stronger month in February (Jonathan Brady/PA) (PA Wire)

British businesses, especially those in the service industry, are rebounding from the impacts of the Omicron wave of coronavirus and leaving behind the sluggish growth seen in January, new data suggests.

According to an influential survey, the economy has scored 60.2 so far in February, up from 53.4 in January.

The IHS Markit/CIPS flash UK composite PMI counts anything above 50 as growth; anything below that means a sector is contracting.

The measure has hit more than 60 for the first time in months – the best performance since June last year.

With February’s rate of cost inflation the second highest on record, wage rises, energy costs and continuing raw materials shortages took a sizeable chunk out of business profits

Duncan Brock, CIPS

It came after January’s figures showed the worst growth in 11 months, when the Delta variant of Covid-19 was widespread.

February’s reading is based on preliminary data and a full score will be released early next month.

The jump in growth was driven by the services sector, which jumped from 54.1 in January to 60.8 so far in February.

Chris Williamson, chief business economist at IHS Markit, said: “The latest PMI surveys indicate a resurgent economy in February, as business activity leapt as Covid-19 containment measures were relaxed.”

But the growth has come with a sting in its tail for businesses, which are seeing costs soar as they compete for staff and raw materials.

Energy bills are also rocketing, helping to increase the cost of doing business to its second highest level since 1998.

As a result companies are charging more for their products and services.

Respondents reporting ongoing delays and customs difficulties show there are challenges aplenty for the coming months

Duncan Brock, CIPS

Duncan Brock, group director at CIPS, said: “With February’s rate of cost inflation the second highest on record, wage rises, energy costs and continuing raw materials shortages took a sizeable chunk out of business profits.

“On the other side, manufacturers saw a subdued pipeline of work along with job hires as building capacity remained difficult with the continuing talent shortages, and vacancies were unlikely to be filled.

“Even with the strongest month for supply chain performance since November 2020, some raw materials were still difficult to source and shipping delays remained.

“As the shadow of the pandemic recedes and Brexit obstacles come into view, respondents reporting ongoing delays and customs difficulties show there are challenges aplenty for the coming months.”