Economy revives

UK at turning point as growth gathers momentum

chart and business finance
Firms are seeing a rise in output

A move out of recession appears to be confirmed by surveys supporting the UK Government’s view that the economy has reached a “turning point”.

Output across the UK touched its highest level since May 2022 last month as price rises fell to their lowest in three years, according to a survey by the BDO Output Index.

Kaley Crossthwaite, partner at BDO, said: “Output reaching its highest point in nearly two years illustrates the UK’s robustness in the face of global economic adversities and is a big step towards economic stability and growth.”

Research by big four accountant and business adviser Deloitte found that the chief financial officers at Britain’s largest listed companies were growing increasingly confident in their trading prospects.

Ian Stewart, chief economist at the firm, said: “Optimism among the UK’s largest businesses is running at well above average levels, suggesting that the worst of the economic downturn is behind us, with current sentiment at levels that preceded periods of good growth in 2010, 2014 and 2021.”

Last month’s purchasing managers’ indices for the services, manufacturing and construction sectors each indicated a switch from contraction to growth, the first time all three readings have signalled growth since June 2022.

Economists say the data is clear evidence the UK economy’s slide into recession in the second half of last year – when GDP fell by 0.1% and 0.3 % in the third and fourth quarters respectively – has been reversed. The International Monetary Fund is this week expected to say the UK economy will expand by 0.6% this year.

While the economy returns to growth, the jobs market has slowed. BDO also said that employment suffered its ninth consecutive month of weakening, slipping to its lowest point in more than a decade.

However, this may help persuade the Bank of England to reduce the cost of borrowing. Markets have pencilled in June for the first in a series of interest rate cuts this year.

More evidence of slowing jobs demand has emerged from the Royal Bank of Scotland which say the number of job vacancies in Scotland has fallen over the past eight months.

Its latest Jobs survey, compiled by S&P Global, highlights a “sustained deterioration” in adverts for permanent jobs across Scotland during March, with recruiters noting an eighth consecutive monthly fall in the number of vacancies.

Demand for permanent and temporary workers deteriorated sharply the bank said, describing pressures on salaries and hourly wages as “historically muted”, with pay recording the weakest increase in more than three years.

The rate of decline eased from February, but the number of people placed in permanent roles fell more sharply, the data shows. A sixth successive monthly rise in temporary candidate availability was recorded across Scotland last month.

The fastest drop in demand for temporary staff in March was in the “executive and professional” sectors in Scotland, followed by hotel and catering, but the data also revealed a fall in permanent candidate availability in Scotland, the bank said.

Across the UK, temporary placements were the lowest they have been since July 2020 — although temporary staff wages rose at the end of the first quarter of the year, RBS said.

The supply of permanent staff expanded across the UK as a whole, but fell in Scotland in March. Permanent placements also fell at the UK level, although at a “softer pace” than that seen in Scotland.

Sebastian Burnside, chief economist at Royal Bank of Scotland, said: “The Scottish labour market continued to exhibit weakness which has now existed for most of the last year and a half.”

Wages for new permanent recruits rose at the slowest pace in three years in March, according to an index produced by KPMG and the Recruitment and Employment Confederation.

Starting pay for temporary workers declined to its lowest point in four months, signalling that a rise in available workers and businesses’ curbing hiring amid economic uncertainty has held back pay growth in the jobs market.

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