The pace of the UK’s economic recovery fell behind the global benchmark in January amid the fallout from the pandemic as supply chains were hit, although the vaccine rollout that started in the country in December could change that, a new report revealed.
The rollout drove the majority of sectors growth expectations ahead of their international peers, according to the latest Lloyds Bank (LLOY.L) UK Recovery Tracker.
Jeavon Lolay, head of economics and market insight, Lloyds Bank Commercial Banking, said that "while the current lockdown will continue to significantly impact the UK’s prospects in the short term, it is also clear that the progress of the vaccine rollout has instilled confidence for the future.
"UK business expectations for the next 12 months remained robust in January and well ahead of the global average, on hopes for a fast recovery once restrictions are loosened."
Research shows the output of 11 of the 14 UK sectors monitored by the tracker fell in January, as the third national lockdown came into force.
Consumer-facing services sectors most affected by restrictions on trade, including tourism and recreation (19.3) and transport (31.5), saw the sharpest decline.
A reading above 50 signals output is rising, while a reading below 50 indicates contraction.
Only the food and drink (59.5), metals and mining (58.2) and industrial goods (57.8) manufacturing sectors recorded rising output in January.
They were also the only UK sectors ahead of the global benchmark, five sectors fewer than December, leaving the UK’s pace of economic recovery behind the rest of the world at the start of 2021.
UK food and drink manufacturers were furthest ahead of the global benchmark during January, thanks to a rise in domestic supermarkets as global supply chain disruption delayed the arrival of food and drink imports.
However, some firms reported that lower demand from the hospitality sector and difficulties exporting to overseas markets had held back sales.
While UK manufacturers broadly outperformed services businesses for the eleventh consecutive month during January, the output of the automotive (42.4 versus 60.7 in December), chemicals (45.0 vs 63.2) and household product (34.9 vs 57.1) manufacturing sectors fell into contraction.
Firms in these sectors cited significant supply chain disruption for falling output.
As per the tracker’s measure of expected output, 10 of 14 sectors monitored anticipated stronger output growth in the UK than their global peers over the next 12 months, as the UK’s COVID-19 vaccination programme outpaced other major economies.
The metals and mining (82.1) and healthcare (80.8) sectors were the furthest ahead of the global benchmark during January, reflecting strong order books and pandemic-related work respectively.
The proportion of UK firms that mentioned ‘redundancies’ when reporting on their staffing trends dropped to just 8% in January, the lowest proportion since April 2020.
In contrast, 20% of survey respondents mentioned ‘furlough’, the highest proportion since July 2020.
The findings follow the government’s extension of the Coronavirus Job Retention Scheme (CJRS), to the end of April 2021.
Scott Barton, managing director, corporate and institutional coverage, Lloyds Bank Commercial Banking, said: “It will be interesting to see how business growth expectations are affected by the government’s ‘roadmap’ out of lockdown which is due to be published on Monday (22 February) and by changes to business support measures announced by the chancellor in next month’s budget.”
Optimism is growing over the speed and effectiveness of the UK's coronavirus vaccine rollout, fuelling hopes of a greater and swifter rollback of the lockdown restrictions currently hobbling the UK economy.
Ministers have set a target date of 8 March for reopening school buildings, but no further dates have been given for other areas. Non-essential shops and rules on outdoor meetings expected to be eased after schools.
UK prime minister Boris Johnson urged the public to be "optimistic but patient" in a press conference earlier this week, and that he wanted the current lockdown to be the last.
He said there was "grounds for confidence" mass vaccinations had begun to curb the spread of COVID-19 in a press conference on Monday night. The UK recorded 9,765 new confirmed infections on Monday, the first time it has fallen below 10,000 since October.
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