British businesses saw their fastest upturn in five years during July as their European counterparts also witnessed growth for the first time since the coronavirus hit, fresh figures indicate.
However, despite the encouraging signs, experts have warned that a hoped for V-shaped recovery is not guaranteed given the economic damage caused by the lockdowns aimed at containing the spread of COVID-19.
A closely watched business survey gave the UK’s private sector a score of 57.1 so far in July, up sharply from 47.7 last month, where anything above 50 signals growth.
The flash figure comes from the Purchasing Managers’ Index (PMI), which is compiled every month by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).
The preview comes ahead of the the finalised number, which is due in early August.
July is the third month in a row that the PMI score has risen from an all-time low of 13.8 in April, and is the fastest expansion since June 2015.
However, sounding a note of caution, IHS Markit’s Chris Williamson said: “While the recession looks to have been brief, the scars are likely to be deep.
“Even with the July rebound there’s a long way to go before the output lost to the pandemic is regained and, while businesses grew more optimistic about the year ahead, a V-shaped recovery is by no means assured.”
Many companies are still experiencing low demand and are shedding jobs, which in turn could lead to further contraction as households tighten their belts.
Mr Williamson said: “July’s PMI represents a step in the right direction but there is a mountain still to climb before a sustainable recovery is in sight.”
Meanwhile, businesses in the eurozone have also experienced growth according to the index, with a score of 54.8 recorded for July – up from June’s final reading of 48.5 and its highest since mid-2018.
It came after EU leaders agreed a €750bn (£682bn) pandemic recovery fund.
Jack Allen-Reynolds of Capital Economics said: “The sharp rise… is an encouraging sign that the economic recovery continued at a decent pace.
“But we suspect that activity will remain below pre-crisis levels for at least the next couple of years.”
This cautious outlook was echoed by Bert Colijn of the investment firm ING, who said: “A V-shaped recovery seems quite unrealistic, despite the encouraging numbers.”