Pace of UK’s economic recovery from Covid falls behind global benchmark - Bank of Scotland

The pace of the UK’s economic recovery fell behind a global benchmark last month, but the vaccine rollout boosted growth prospects for the months ahead, according Bank of Scotland.

Consumer-facing services sectors most acutely affected by restrictions on trade, including tourism and recreation, saw the sharpest decline.
Consumer-facing services sectors most acutely affected by restrictions on trade, including tourism and recreation, saw the sharpest decline.

The bank’s UK Recovery Tracker, working with IHS Markit, provides an insight into the shape and pace of the UK’s recovery from the disruption caused by Covid-19.

The output of 11 of the 14 UK sectors monitored by the tracker fell in January, as the latest lockdown measures came into force. Consumer-facing services sectors most acutely affected by restrictions on trade, including tourism and recreation, saw the sharpest decline.

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Only the food and drink, metals and mining and industrial goods manufacturing sectors recorded rising output. 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.

Turning to the tracker’s measure of expected output, ten of the 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.

Meanwhile, the proportion of UK firms that mentioned “redundancies” when reporting on their staffing trends dropped to just 8 per cent in January, the lowest proportion since April 2020. In contrast, 20 per cent of survey respondents mentioned “furlough”, the highest proportion since July 2020.

Jeavon Lolay, head of economics and market insight, Lloyds Bank Commercial Banking, said: “The output of consumer-facing services was predictably the most affected by the latest lockdown, with clear indications that activity was hit harder than during last November’s restrictions.

“However, the performance of those businesses still able to trade was more mixed. While global supply chain disruption and raw material shortages caused major issues for some key manufacturing sectors, it boosted output growth for beverages and food, metals and mining and industrial goods manufacturers.

“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.”

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