Business activity slows on staff and supply shortages

Britain’s private sector business activity slowed sharply in August due to ongoing staff and supply shortages, a survey showed Monday.

The composite purchasing managers’ index (PMI) hit a six-month low of 55.3 points, compilers IHS Markit and the Chartered Institute of Procurement and Supply said in a statement.

That compared with a reading of 59.2 in July, but it held above the key 50 level to indicate expansion.

“An abnormally large slowdown in overall activity in August offers a stark warning to the UK economy that the accelerated levels of growth we’ve seen earlier this summer are not sustainable,” said CIPS group director Duncan Brock in a statement.

“It was the slowest output expansion for six months, and the worst shortages of staff and materials on record are mostly to blame.”

IHS Markit noted that the economy, which fully reopened last month, continued to grow above its pre-pandemic average.

However it also highlighted “clear signs” of a loss of momentum in the third quarter, or three months to September.

“Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages,” said IHS Markit economist Chris Williamson.

“Supplier delays have risen to a degree exceeded only once before – in the initial months of the pandemic – and the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history.”

Recent official data showed that Britain’s economy rebounded 4.8 percent in the second quarter as the government began relaxing lockdown restrictions amid its fast-paced vaccination programme.

However, the rebound faces challenges as global supply chain bottlenecks persist and a jobs protection programme is set to end in September.