The economy is bouncing back at a record rate but the main problem facing businesses is a shortage of staff, experts have warned.
Latest data showed the services part of the economy grew rapidly in June with PMI output coming in at 62.4, marginally below the 62.9 reading in May. Nevertheless, anything above 50 represents growth.
The sector covers restaurants and bars as well as the financial industry and is the largest part of the British economy.
Tim Moore, economics director at data gathering business IHS Markit, said: ‘The service sector recovery remained in full swing during June as looser pandemic restrictions released pent-up demand for business and consumer services.’
But a shortage of workers continues to plague the sector and as a result firms are struggling to meet demand.
It is understood staff who used to work in the hospitality industry have moved away from big cities like London to save money during the pandemic, while many foreign workers returned home.
Others used the pandemic to seek out other kinds of work and are reluctant to return to the ‘brutal’ culture of long hours and night work that can be the norm in the restaurant and bar sectors.
Video: UK recovery quickens in April as economy posts record annual jump (Reuters)
Moore added: ‘Capacity constraints and staff shortages meant that many service providers struggled to keep up with new orders.
‘Backlogs of work increased at a faster pace than any other time since records began in July 1996.
‘There were difficulties filling staff vacancies in all parts of the service economy during June, with hospitality and leisure experiencing the greatest squeeze,’ he said.
Prime Minister Boris Johnson confirmed he expects to lift the last remaining lockdown restrictions later this month with social distancing rules, mask laws and the work-from-home order set to go.
His comments were welcomed by the hospitality sector, which cheered the prospect of Freedom Day on July 19, including drinkers being welcomed back to the bar.
Kate Nicholls, chief executive of UK Hospitality, said: ‘The announcement marks a major milestone in how England will come to live with Covid and will be celebrated by hospitality business owners and their staff.
For the vast majority of hospitality businesses, July 19 will be the first time in 16 months that they have been able to realistically look to break even and move towards profitability.’
She added: ‘It will still be a long road back for businesses that have been forced to take on debt just to survive, especially with the reintroduction of business rates payments.
‘Nevertheless, this is a critical move that will unleash a sector that is eager to play its part in the wider national recovery.’