PMIs: Opening of US travel brings international boost for UK services

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Tea

British services firms last month saw the sharpest jump in new international trade since 2017 as the reopening of the US border and the general easing of travel restrictions, according to new data.

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Services sector businesses, including airlines and travel agents, reported an increase in new hires from overseas in November, the IHS Markit/CIPS UK Services PMI survey found.

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This was mainly due to an increase in travel bookings and higher levels of spending by foreign visitors. Some firms said a rebound in international business travel also boosted export sales.

The sector has seen the fastest growth in new business in the past five months, with more than 30% of businesses surveyed saying they saw an increase in fresh business in the month.

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It comes after West End’s pubcos and retailers saw an increase in footfall and business — many nearly to 2019 levels — in November.

Despite companies facing rising inflation, the PMI survey – a score of economic health – recorded a reading of 58.5 last month, up from 59.1 in October. Any score above 50 is considered to show growth.

Tim Moore, economics director at IHS Markit, said: “The overall pace of recovery has accelerated compared to the third quarter of 2021 … rising price pressures did little to dent trade and consumer spending in the UK economy for the latest PMI data.

However, there is growing concern that the Omicron variant will end the boom and even reverse gains. The new version has already prompted governments around the world to tighten travel restrictions – increasing testing regimes and banning flights to countries, including South Africa, where it was sequestered.

PMI also showed that although employment numbers grew for the ninth consecutive month, they did so at a much slower pace than in October. The survey concluded that it reflected companies having difficulty finding candidates to fill vacancies, as employees continued to leave jobs “for higher wages or a change in lifestyle”.

He said the month’s growth was mostly driven by services as manufacturers were “struggling with severe shortages of raw materials and critical components”, however.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply (CIPS), cautioned: “With all these reasons cheering, firms remain short on festive cheer. Higher wages since November 2020 fuel business optimism lowest level ever recorded, and material costs were still giving businesses hangovers.

“Input prices reach another survey record, with 64% of supply chain managers paying more to keep their businesses running, which begs the question – how long can this last and can businesses continue?”

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