Growth in UK economic activity has slowed to its weakest tempo since February because the unfold of the Omicron coronavirus variant hits client demand for journey and hospitality, a key survey confirmed on Thursday.
The flash UK composite output index revealed by IHS Markit and the Chartered Institute of Procurement and Supply fell from 57.6 in November to 53.2 in December, dragged down by a pointy drop in service sector activity as new virus restrictions hit client confidence.
Business confidence in the economic outlook additionally sank for a fourth consecutive month, with expectations for development in the yr forward now at their lowest since October 2020 — weaker than through the depths of the primary quarter lockdown, when the vaccination drive was getting beneath method.
Chris Williamson, economist at IHS Markit, stated there was a glimmer of fine information from the manufacturing sector, the place provide chain blockages had eased considerably. However, the tempo of development was set to weaken heading into 2022, he added, with a “bigger uncertainty” over how far rising an infection charges may exacerbate labour and provide shortages, renewing inflationary pressures.
Gabriella Dickens, on the consultancy Pantheon Macroeconomics, stated the information have been “the clearest sign yet that the Omicron variant has set back the economic recovery”.
Meanwhile, actual time information confirmed the quickly worsening outlook for the industries most immediately affected by the surge in infections and the imposition of latest restrictions.
Figures from OpenTable, the net reserving website, confirmed the variety of seated diners at UK eating places in the week to December 14 was barely modified from its degree two years in the past — the weakest displaying because the hospitality sector reopened in May — whereas it was 15 per cent above its 2019 degree in the late November week earlier than information of the Omicron variant emerged.
Some companies affected by a sudden cease in bookings could also be ill-prepared to cope: an Office for National Statistics survey confirmed that 13 per cent of all companies had no money reserves in the week to December 12, the best proportion reported since June 2020, with the proportion rising to virtually one in 5 in the lodging and meals providers sector.
There are additionally some indicators of client spending beginning to soften in probably the most uncovered sectors.
Airline spending was 39 per cent decrease in the week to December 12 than in the equal week of 2019, in contrast with a shortfall of 20 per cent the earlier month, in accordance to Fable Data, an organization that tracks financial institution transactions. There was additionally an analogous hunch in broader spending on worldwide journey and tourism, though there was not but any main change in spending on consuming out, or on public transport and gas, regardless of the renewal of work at home steerage.
Paul Dales, on the consultancy Capital Economics, stated that till the top of final week he had been predicting a drop of not more than 0.1 per cent in December’s gross home product due to Omicron — however that the fast flip of occasions now made a fall of 0.5 to 1 per cent look doubtless.
If the UK entered lockdown in the brand new yr, GDP may fall no less than 3 per cent, he added — with a extra extreme, protracted decline potential if the federal government failed to step up fiscal assist.