Growth in private sector activity eases but still strong
Private sector activity expanded at an above-average pace in the three months to September, but growth slowed compared with the previous month, with a net balance of +27% (down from +34%) – according to the CBI’s latest monthly Growth Indicator.
The slowdown was fairly broad-based, with growth softening in consumer services (+6% from +30%), distribution (+29% from +53%) and manufacturing (+16% from +22%). Meanwhile, business & professional services firms reported a slight uptick in the pace of growth (+39% from +32%).
Looking ahead, private sector activity is expected to expand at a steady pace in the three months to December (+28%). Manufacturers expect growth to pick up (+25%), while consumer services firms expect business volumes to fall slightly (-5%). Business and professional services firms (+40%) and distribution firms (+26%) anticipate a similar pace of growth to the three months to September.
The composite measure is based on responses from 576 firms between 25 August and 15 September.
Anna Leach, CBI deputy chief economist, said: “The private sector recovery has slowed this month as the immediate boost provided by loosening Covid-19 restrictions fades amidst a mix of labour and materials shortages, and supply chain disruption.
“With more and more firms shifting their focus from long-term growth to short-term coping strategies, the CBI has proposed creating a ‘COBR-level’ Government & Business Taskforce charged with monitoring disruption to business operations, ensuring timely and effective responses, and helping to keep the recovery on track.”
Additional questions on labour shortages
This month’s Growth Indicator included additional questions on labour shortages. There were 599 responses in total for these questions (including a small number of responses collected outside of the regular surveys).
- Number of firms facing labour shortages
- 59% of respondents said they are currently facing labour shortages, 41% said they are not currently facing labour shortages
- Factors driving labour shortages
- 59% of respondents cited difficulty recruiting new employees as a factor driving labour shortages.
- Difficulty retaining existing staff (25%) and longer-term skills gaps (22%) were also cited as significant factors.
- Business response to labour shortages
- 42% of respondents are raising pay for key/specific roles to deal with labour shortages
- Around a quarter are readjusting operations (24%) or investing in tech/automation (23%).
- Around a fifth (21%) are amending hiring practices
- Expectations for how long labour shortages will last
- 3% of respondents expect labour shortages to persist for up to 3 months.
- 11% expect labour shortages to persist for 4-6 months.
- 14% expect labour shortages to persist for 7-12 months.
- 16% expect labour shortages to persist for 1-2 years.
- 13% expect labour shortages to persist for more than 2 years.
- 32% of firms responded saying that they were not facing labour shortages