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COVID-19: Vaccine hopes ‘lift business confidence to highest level since March 2015’ | Business News

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COVID-19: Vaccine hopes 'lift business confidence to highest level since March 2015' | Business News

A closely-watched survey of businesses has found confidence in the year ahead at its highest level since March 2015, despite further coronavirus restrictions damaging activity last month.

The IHS Markit/CIPS purchasing managers’ index (PMI) found that COVID-19 vaccine developments had driven the shift in sentiment across the service and manufacturing sectors in November despite continued Brexit uncertainty.

It has since been confirmed that the UK will be the first to roll out the Pfizer/BioNTech vaccine following its approval by regulators.

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Business activity fell less than expected as the so-called composite PMI reading – which includes the dominant services sector, though not retail, and factories – came in stronger than initial findings had suggested.

The composite PMI dropped to 49 from 52.1 the previous month and was the weakest figure since June.

Any reading below 50 indicates contraction.

IHS Markit economist Tim Moore explained: “New lockdown measures and tighter pandemic restrictions unsurprisingly tipped UK private sector output back into decline.

“However, the collateral damage on sectors outside of hospitality, leisure and travel has been far more modest than in the first lockdown period.”

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Britain’s economy suffered a record 25% fall in output during the first lockdown in March and April and a 15.5% bounce back in the third quarter.

The Bank of England forecast this month that output would decline by just 2% in the final three months of 2020.

A survey of chief financial officers released by the Bank on Thursday suggested similar optimism to that witnessed in the PMI with sales rebounding next year but still 15% down on normal levels in December.

It found 11% of employees were on furlough during November – up from 5% in October – while separate data from the Office for National Statistics showed a six percentage point increase in furlough claimants.

The PMI survey showed private sector job losses continued for a ninth consecutive month.

The Bank has forecast an unemployment rate peak of 7.75% next year – up from a current 4.8%.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said of its survey findings: “‘The vaccine breakthroughs have given businesses a shot of confidence that the economy will warm up faster from the cold shock of COVID.

“Although optimism is slowly seeping back into boardrooms, worries still reign with 67% of businesses saying the overall economic uncertainty remains high, compared with 40% at the start of the year.

“Brexit, which had taken a back seat, is again starting to weigh on minds as we fast approach the end of the transition period with no deal in sight.”

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Virus lockdown and Brexit bureaucracy hit UK economy – PMI | Business News

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Virus lockdown and Brexit bureaucracy hit UK economy - PMI | Business News

Business activity saw its sharpest drop in the UK since May, according to a closely-watched survey.

The preliminary IHS Markit/CIPS Flash UK composite purchasing managers’ index (PMI) fell to a reading of 40.6 in January, down from 50.4 in December.

Anything below 50 signals a contraction and the flash survey covers around 75-80% of the total survey.

The survey blamed the latest shutdown brought in by the government to limit the spread of the coronavirus and the post-Brexit shift to a more bureaucratic trading arrangement with the European Union.

Chris Williamson, chief business economist at IHS Markit, said: “Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.”

The pace of job losses accelerated in January, despite an easing in December.

It comes as the number of UK deaths from COVID-19 nears 100,000 – the highest in Europe and the fifth-highest in the world after the US, Brazil, India and Mexico.

But, with the vaccine programme continuing to expand, there are hopes for an economic rebound later this year, with the number of companies feeling optimistic about the year ahead hitting a 6.5-year high.

The PMI for the services industry, which accounts for 80% of Britain’s economy, fell to 38.8 in January from 49.4 in December, its lowest level since May and the third month of contraction.

The manufacturing PMI fell to 52.9 in January from 57.5 in December.

Ruth Gregory, senior UK economist at Capital Economics, said the drop in the composite flash PMI was “far larger than the consensus forecast”.

On a more positive note, the manufacturing PMI “only” dropped from 57.5 in December to 52.9, and a third of that decline was due to the “stocks of purchases” balance falling to a more normal level.

“Admittedly, the PMI received a boost due to the lengthening of suppliers’ delivery times, caused by Brexit supply chain disruptions and COVID-19 border closures. Longer delivery times are usually associated with strong demand and raise the headline index.

“But the output balance remained above the 50 no-change mark.

“Overall, the composite PMI points to a fall in GDP in January of about 5% month-on-month. That would be much bigger than November’s 2.6% month-on-month fall in GDP, but at least it would be mild in the context of the 18.8% m/m decline seen during the first lockdown in April 2020.”

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Retail sales for 2020 show largest annual fall in history – ONS | Business News

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Retail sales for 2020 show largest annual fall in history - ONS | Business News

Retail sales in 2020 saw the largest annual fall in history as retailers continued to suffer from the effects of the coronavirus pandemic.

Despite a 0.3% rise in sales volumes during December, the figure for 2020 as a whole saw sales down 1.9%, with clothing sales slumping by more than a quarter.

The slight rise in December was far less than the 1.2% increase expected by economists and left sales 2.9% higher than a year earlier, according to the official figures.

Spending online, however, surged by 46.1% in 2020.

Ian Geddes, head of retail at Deloitte, said: “Some consumers will have permanently converted to the convenience of online shopping, accounting for 29.6% of all retail sales this month, and the highest annual growth since 2008.

“For retailers, this doubles down the importance of an online shopfront and engaging virtual shopping experience. Whilst the role of the physical store will remain competitive, the wider retail landscape will likely see reinvention. A new era of ‘hyper-localisation’ and ‘fast fail’ shops could herald a revived and more relevant high street longer-term.

“For now, pent-up demand is likely to see shoppers out in force once restrictions lift, as we saw in summer at the end of the first lockdown. Crucially, the reopening of the high street will this time coincide with the ongoing vaccine rollout, which should boost consumer confidence and see them return to stores once more.”

The UK economy has been harder-hit than any other advanced country during the coronavirus pandemic – in November the economy shrank by 2.6% mainly thanks to a four-week lockdown in England and similar measures in other parts of the UK.

With non-essential retail still closed under government rules, most economist expect a further contraction in the next financial quarter.

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Retail sales for 2020 show largest annual fall since records began | Business News

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People queue inside the Westfield Stratford City shopping centre, amid the coronavirus disease (COVID-19) outbreak in London, Britain, December 5, 2020. REUTERS/Henry Nicholls

Retail sales in 2020 saw the largest annual fall since records began in 1996, as retailers continued to suffer from the effects of the coronavirus pandemic.

Despite a 0.3% rise in sales volumes during December, the figure for 2020 as a whole saw sales down 1.9%, with clothing sales slumping by more than a quarter.

The slight rise in December was far less than the 1.2% increase expected by economists and left sales 2.9% higher than a year earlier, according to the Office for National Statistics (ONS) figures.

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Shoppers at Westfield Stratford City the run-up to Christmas

While spending online surged by 46.1% in 2020, non-essential retail was closed for much of the year under rules brought in by the government to limit the spread of the coronavirus.

ONS deputy national statistician Jonathan Athow said the slight uptick in December was driven by an improvement in clothing sales.

But food sales were “subdued, as retailers reported lockdowns and restrictions on the sale of non-essential items impacted on footfall”.

Mr Athow said that over the year of 2020, clothing retailers had “fared particularly badly”, with a record annual fall of more than 25%, while restrictions on travel led to a record year-on-year decline in fuel sales.

Ian Geddes, head of retail at Deloitte, said the figures proved the “importance of an online shopfront and engaging virtual shopping experience”.

“Whilst the role of the physical store will remain competitive, the wider retail landscape will likely see reinvention. A new era of ‘hyper-localisation’ and ‘fast fail’ shops could herald a revived and more relevant high street longer-term,” he said.

“For now, pent-up demand is likely to see shoppers out in force once restrictions lift, as we saw in summer at the end of the first lockdown. Crucially, the reopening of the high street will this time coincide with the ongoing vaccine rollout, which should boost consumer confidence and see them return to stores once more.”

The UK economy shrank by 2.6% in November, mainly due to a four-week lockdown in England and similar measures in other parts of the UK.

With non-essential retail still closed under government rules, most economists expect a further contraction in the next financial quarter.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Big chains that have mastered the art of selling online via click and collect and deliveries have reaped huge rewards. The value of online retailing sales increasing by 46.1%, the highest annual growth in a decade.”

She pointed to supermarkets, DIY and household goods as particularly examples.

“These trends are not going away anytime soon, with shoppers forced once again to browse the virtual aisles from the comfort of their sofas,” she added.

“With many weeks or even months of lockdown ahead of us, it’s likely these habits will become even more engrained in our psyche as physical stores stay locked and empty.”

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