By David Milliken
LONDON (Reuters) – Britain’s economy made only a subdued return to growth in December after shrinking during a four-week England-wide coronavirus lockdown in November, as the large services sector failed to fully recover, a survey showed on Wednesday.
The IHS Markit/CIPS composite Purchasing Managers’ Index (PMI) rose to 50.4 in December from 49.0 in November, a slightly smaller increase than in an earlier flash estimate.
The services PMI, which makes up the largest part of the composite index, remained below the 50 mark which separates growth from contraction at 49.4. This was up from November’s five-month low of 47.6 but also below the flash reading.
“December data confirm that the UK service sector has swung back into decline after the partial rebound seen during the third quarter of 2020, largely reflecting tighter restrictions on consumer services amid the worsening trajectory of the pandemic,” IHS Markit economics director Tim Moore said.
December had brought some optimism to British businesses with the beginning of the rollout of coronavirus vaccines.
Businesses are more optimistic about the outlook, with the index for future output only a fraction lower than November’s five-year high.
But vaccinations started too late to stop a surge in cases which on Monday prompted Prime Minister Boris Johnson to set out a new, tougher lockdown. This will last until at least mid-February and economists think it will tip Britain back into recession.
“Service providers will be braced for a sustained period of subdued UK economic conditions and deferred client spending in the first quarter of this year,” Moore said.
The economic damage is not expected to be on the scale of the first lockdown, when economic output slumped as much as 25%.
But a survey from the British Chambers of Commerce, released late on Tuesday, showed many businesses not directly affected by lockdown restrictions reported a drop in sales during November’s lockdown as their clients suffered cashflow difficulties.
(Reporting by David Milliken; Editing by Catherine Evans)