Strong services data for July indicates health in the sector

The services PMI for July came in at 60.2.

Market Economics has released the purchasing managers' index data for the services sector in the month of July. It shows a sharp increase in activity in the sector, dominant in the UK economy: the index stands at 60.2, well above the 57.2 forecast. It is the best growth services have seen since 2006.

The PMI is compiled from data contributed by purchasing managers across Britain, and values of above 50 represent increasing growth in the sector, while values below represent increasing contraction. A value of 60.2 thus represents extremely strong growth for the services sector; and, given the strength of that sector in the national economy, bodes well for overall growth in the third quarter of 2013.

The below chart shows quite how high the reading was, and also how well the PMI data – an incomplete but speedy measure based on survey data – tracks the ONS's official estimate of the sector.

Today's release follows that of the PMIs for the construction and manufacturing sectors, each similarly strong. The former came in at 57.0, up from 51.0 in June, while the latter came in at 54.6, up from 52.9 the month before. Both of those figures represent the fastest growth in their sectors for years, and indicated that the slump is well and truly coming to an end. Markit's chief economist, Paul Smith, says that the service sector "appears to have genuine momentum". "Although an early call on one month's data," he adds, "the forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards 'escape velocity' and self-sustaining economic expansion."

Those forward-looking elements include measures of backlogs in orders, as well as questions of business confidence. Backlogs, which indicate pressure on companies to expand their production, had the sharpest rise since February 2000, and have now risen four months in a row. Business confidence also strengthened, to its highest level for over a year, although that still leaves it well below even the burst in optimism immediately following the recession, let alone the typical sensibility in the mid-2000s.

The pound saw a slight boost following the release of the news, rising against the dollar from 1.532 to 1.535.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.