UK businesses return to growth in December after lockdowns
The UK’s businesses clawed their way back to growth in December after the England-wide lockdown hit the economy in November, a new survey has shown, although conditions were better in manufacturing than the all-important services sector.
An early reading of the IHS Markit purchasing managers’ index (PMI) – a closely watched economic gauge – rose to 50.7 in December from 49 in November. A score above 50 indicates expansion.
The data comes after London was put into the strictest Tier 3 lockdown just after midnight on Wednesday morning. More than 30m Britons are now under the tightest restrictions, which force pubs and restaurants to close except for takeaways.
Businesses and economists have warned that the new measures – however necessary to curb Covid infections – are likely to deal a heavy blow to the economy in the crucial Christmas period.
Nonetheless, the IHS Markit survey showed that business conditions improved in the first two weeks of December.
Second wave less damaging to UK economy
“The UK economy returned to growth in December after the lockdown-driven downturn seen in November,” said Chris Williamson, chief business economist at IHS Markit.
He said it added to signs that “the hit to the economy from the second wave of virus infections has so far been far less harsh than the first wave in the spring”.
However, the manufacturing sector – which has faced and now faces fewer restrictions – outshone the services sector. The latter makes up about 80 per cent of the economy.
The PMI reading for manufacturing stood at 57.3, a three-year high. The reading for services was 49.9, indicating stagnation after a weak November as many face-to-face businesses still faced restrictions under the tier system.
“The recovery lacked vigour,” said Williamson. “The service sector remained under particular strain, contracting marginally again as ongoing social distancing measures due to tiered lockdowns continued to hit many parts of the economy.”
On a more upbeat note, the rate of job shedding in December fell to its slowest in 10 months. It comes after official data showed redundancies rose at their fastest rate on record in the quarter to October.