The pace of UK economic activity hit a seven-month high in March, according to a closely-watched survey, indicating the country is back in growth.

The flash IHS Markit/CIPS UK Composite Purchasing Managers’ Index – an early indicator of economic health – reported a rush of new orders in anticipation of a vaccine-driven easing of COVID-19 lockdown restrictions.

The authors said the rebound, which came in stronger than economists had predicted, should result in only a “modest contraction” in gross domestic product during the first quarter of the year.

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The PMI reading of services and manufacturing activity, taken after last month’s budget, was 56.6 following 49.6% for February.

Any figure below 50 represents a contraction.

Chris Williamson, chief business economist at IHS Markit, said of the survey: “The encouraging readings on future expectations, job creation and new order inflows… all point to robust economic growth in the second quarter, especially if virus restrictions are lifted further.”

The one major blip remained exports, as new orders fell for the third month in a row.

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The economy contracted by 10% in its biggest annual decline since the Great Frost more than 300 years ago.

But the survey of purchasing managers found corporate confidence was now on the up, mainly thanks to the swift roll-out of vaccines – a factor the Bank of England has pointed to in its latest forecasts.

Rhys Herbert, senior economist at Lloyds Bank, said of the new data: “Many had expected little movement in the PMI measures in March with the economic backdrop largely unchanged month-on-month.

“But the rise in the PMI composite measure is an encouraging sign the economy is now growing again.

“The return of schools helping to free up workers, and some early preparations for the reopening of retail and hospitality, will have helped to put a stop to services’ downturn.

“But manufacturing continues to face challenges despite its growth.

“Freight backlogs, inventories still high from pre-Brexit stockpiling and firms getting up to speed with new paperwork are each pinching output.”

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