The number of UK sectors reporting output growth rose to pre-pandemic levels for the first time during April, according to the latest Lloyds Bank UK Recovery Tracker, as the third national lockdown restrictions began to be lifted.
The output of all of the 14 UK sectors monitored by the Tracker increased in April, up from 11 in March, and for the first time since August 2018.
Manufacturing sectors lead UK recovery
Manufacturers of technology equipment (67.7) and metals and mining products (66.3) recorded the strongest output growth for the second month in a row during April. A reading above 50 signals output is rising, while a reading below 50 indicates output is contracting.
Technology equipment manufacturers – which includes producers of specialist parts in smart devices, motor vehicles, computers and industrial machinery – continued to benefit from high international demand for components. Manufacturers of metals and mining products benefited from global raw materials shortages and surging commodity prices.
Industrial services (60.3) – which include providers of commercial and professional services – was the best-performing UK services sector during April. Firms in the sector, alongside software services (54.4) providers, cited a steep rebound in corporate spending on projects that had been delayed during lockdown and strong demand for business services in support of new investment initiatives.
Tourism and recreation bounces back
Meanwhile, during April, the output of UK tourism and recreation (51.9) businesses rose for the first time since August 2020 following the reopening of outdoor dining at pubs and restaurants. Hospitality businesses also cited a spike in forward bookings in anticipation of lockdown measures easing further.
Similarly, the real estate (53.6) sector also returned to growth during April as firms benefited from offices reopening and favourable conditions in the residential property market.
Automotive manufacturers (50.1) reported a rise in output in comparison to March (46.4), but the increase was marginal and took the sector only slightly above the 50 mark that signals growth. It was the worst performing sector monitored by the Tracker during April, as firms continued to struggle with semiconductor shortages and some overseas customers choosing to buy from EU suppliers post-Brexit. The export orders index for the UK automotive sector was 50.3 during April, which compared with the European benchmark of 62.9.
UK firms’ growth expectations ahead of global pack, despite rising inflation
Turning to the Tracker’s measure of expected output, for 13 of the 14 UK sectors monitored, readings for anticipated output growth over the next 12 months were higher than their global peers, as the UK’s progress out of lockdown and COVID-19 vaccination programme continued to outpace other countries.
Only real estate was behind the global index by this measure, largely due to offices in the US services sector reopening at a faster pace than the UK.
Firms’ positive outlook came as inflation caused UK businesses, during April, to experience the sharpest rise in input costs since February 2017. In response, firms in every sector monitored by the Tracker – apart from tourism and recreation – increased their prices. Chemicals producers recorded the highest increase in prices due to surging demand for raw materials from the global manufacturing industry.
Jeavon Lolay, Head of Economics and Market Insight, Lloyds Bank Commercial Banking, said: “The UK’s recovery seems to have moved into the fast lane. The latest lifting of lockdown restrictions will only fuel a further boost to the already rapid pace of expansion at the start of this quarter.
“It’s no surprise that business optimism for the year ahead is strongest in consumer services on hopes that the re-opening of the economy will lead to a sharp rebound in demand. However, it will also be very interesting to see how UK manufacturers address ongoing supply chain strains as concerns about inflation continue to build.”
Scott Barton, Managing Director, Corporate and Institutional Coverage, Lloyds Bank Commercial Banking, added: “The pace of the UK’s recovery from COVID-19 is clearly accelerating, with all sectors now showing growth. While British technology manufacturers continue to lead from the front, it is particularly promising to see the tourism and leisure sector returning to growth after such a significant period of time. Consumer-facing businesses like pubs and restaurants have borne the brunt of COVID-19 restrictions, and will also be hopeful that the reopening continues as planned.
"Still, there has been so much dislocation in the economy that brighter recovery prospects will need to be balanced with careful business planning and nimble strategies to adapt to the changing situation”.