Britain’s services sector is increasingly struggling to find enough workers amid falling numbers of skilled applicants as Britain prepares to leave the EU.

The latest snapshot from IHS Markit and the Chartered Institute of Procurement & Supply (Cips) for the services industry – which accounts for almost 80% of national economic output – suggested companies are being held back from carrying out their activities by the labour shortage.

The dwindling availability of workers comes after official figures last month showed a record annual decline in migrants coming from the EU, which economists say will act to reduce the number of people available to companies. While labour shortages could drive up wages by increasing the bargaining power of workers, observers are growing increasingly concerned for future economic growth.

According to the survey, there were widespread reports that tightness in labour market conditions had constrained employment growth. The figures follow a drop in the UK unemployment rate to 4% in the three months to June – its lowest level since the winter of 1974-75 – further reducing the number of people available to work.

Jeremy Thomson-Cook, the chief economist at WorldFirst, said the survey data followed several other poor readings for economic growth. “Another day, another survey showing Brexit uncertainty weighing on a part of the UK economy,” he said.

The IHS Markit/Cips purchasing managers’ index, which is closely watched by the Bank of England for early warning signs from the economy, increased to 54.3 in August from 53.5 a month earlier, beating all forecasts in a Reuters poll of economists. A reading above 50 represents economic growth.

The survey of services companies – including transport and communications firms, banks, hotels and restaurants – found optimism for the year ahead had dropped to the lowest level since March. Growth in new work accelerated moderately last month, which will be welcome news for the economy, although it remained weaker than average for the past two years.

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Chris Williamson, the chief business economist at IHS Markit, said the drop in confidence was to the lowest levels seen since the EU referendum. “[This is] largely reflecting increased anxiety over Brexit negotiations,” he said.

Despite the mounting concern over Brexit, the reading from the PMI points towards economic growth of around 0.4% in the current quarter, which would match the UK’s growth rate in April-June, and beat some City forecasts.

The reading also followed better news for the economy from the Society of Motor Manufacturers and Traders, which recorded a 23.1% jump in car sales in August from the same month a year earlier.

Although car sales are typically weaker in August, they have increased in the past three months.





