Services sector work backlogs 'longest since 1997'

Will Green is news editor of Supply Management
6 May 2015

Growth in the UK services sector has hit an eight-month high but work backlogs are the longest since records began, according to a survey of buyers.

The Markit/CIPS UK Services Purchasing Managers’ Index reached 59.5 in April, compared to 58.9 in March and above the no-change position of 50, signalling the fastest rate of expansion since August 2014.

The volume of new business rose for the 28th successive month last month and firms reported successful marketing campaigns and large contract wins with major clients.

Input prices continued to rise solidly on the back of wage pressures but firms cut prices for the first time in six months, and at the fastest rate since February 2012, putting pressure on margins.

David Noble, group CEO, CIPS, said: “One underlying concern was the sustained increase in backlogs with the current sequence now in its twenty-fifth month – the longest since the survey began.

“However, healthy levels of positivity in future business opportunities continued and with the looming General Election offering just a minor bump in the road of confidence, the sector looks set to maintain its strong lead in the months ahead.”

Chris Williamson, chief economist at Markit, said: “Rather than rebalancing towards manufacturing, economic growth has become increasingly reliant on the service sector, and the consumer is having to drive growth as investment spending remains disappointingly weak amid heightened political uncertainty.

“Prices are also falling amid signs of intense competition. The surveys are showing the steepest drop in average prices charged for goods and services since 2009, which will revive worries about deflation.”

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