According to the report from IHS Markit / CIPS, UK private sector companies reported a sharp and accelerated increase in business activity during August, with both the manufacturing and service sectors continuing to experience a recovery in customer demand.

The headline seasonally adjusted Flash UK Composite Output Index - which is based on approximately 85% of usual monthly replies – registered 60.3 in August, up from 57.0 in July and signalling the fastest rate of business activity expansion since October 2013. Manufacturing production (index at 61.6) increased at a slightly quicker pace than service sector activity (60.1) during the latest survey period.

Higher levels of private sector output were overwhelmingly attributed to the reopening of the UK economy after the lockdown period in the second quarter of the year and a subsequent increase in both consumer and business spending.

Total volumes of new work expanded for the second month running in August, with the latest increase the fastest since July 2014. New order growth was mostly linked to an accelerated reopening among corporate customers, alongside greater willingness-to-spend among UK households. Survey respondents often commented on the restart of projects delayed during the public health emergency, but continued to note that levels of demand remained well below those seen prior to the pandemic. Concerns about the speed and duration of the recovery resulted in sustained job cuts across the private sector during August. In contrast to the positive trends for output and new orders, latest data indicated the fastest pace of decline in employment numbers since May. 

August data pointed to a setback for business expectations across the private sector economy. The index measuring growth projections for the next 12 months dipped for the first time since March, with some survey respondents citing concerns that the recovery will be slower than first expected.