The “pingdemia” could now dampen Britain’s economic recovery, data shows.
The figures show a sharp slowdown in private sector growth in July. This part of the economy grew at its slowest pace in four months, and business optimism, a key weathervane for the future outlook, fell to its lowest level in nine months.
Staff forced to self-isolate after being exposed to a Covid-19 case has been one of the drivers of this slowdown, according to company responses. This has exacerbated existing staff shortages in industries such as the hospitality industry, according to the survey, which is compiled by research firm IHS Markit and industry body, the Chartered Institute of Procurement & Supply.
Some 600,000 people have been ‘screwed’ by the Covid-19 NHS app this week, thanks to a surge in infections, and after the government continued to lift restrictions.
On an index where any score above 50 indicates growth, the UK private sector reached 57.7 in July, down from 62.2 in June.
Chris Williamson, chief economist at IHS Markit, said: “July saw the recent growth spurt in the UK economy stifled by the growing wave of viral infections, which has reduced customer demand, disrupted retail chains. supply and caused widespread staff shortages, and also cast a darkening shadow over the outlook.
Companies have raised concerns about how long they fear the pandemic will last, suggesting they fear the problem of staff shortages will be long lasting.
It also comes after the head of one of the UK’s largest business lobbying groups, the Confederation of British Industry, said on Thursday the number of workers self-isolating was so large that it could force businesses to close in a matter of weeks.
“The current approach to self-isolation shuts down the economy rather than opening it up,” said Tony Danker, CEO of the CBI. “This is surely the opposite of what the government wanted. Businesses have exhausted their contingency plans and risk shutting down in the coming weeks. “
For companies that reported a resumption of operations, around 32% said they benefited from the removal of restrictions. This is manifested by consumers who invest in stays and other business services. This compared to about 16 percent of companies who noted a drop in production.
Business optimism waned in July, according to the survey. Overall, companies rated business as good over the next 12 months, but their confidence in the future has fallen to its lowest level since October 2020.
This type of survey is very “heavily influenced by sentiment, so its direction is often more important than its level,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics. She added that this matched other metrics, such as OpenTable data on restaurant diners and transportation use, providing “further evidence that the economic recovery is faltering.”
“Most other indicators suggest that the recovery has stalled, temporarily, due to the third wave of Covid-19 infections,” Ms Dickens said.
The slowing rate of business growth might not be as troubling as the survey suggests, according to Kieran Thompkins, assistant economist at Capital Economics. The expected boost for companies from the removal of certain pandemic restrictions may have already been accounted for in the data for previous months.
However, comments from the survey “citing growth brakes due to self-isolation mean that the resurgence of the virus is becoming a growing downside risk” to GDP growth, he said. This could put pressure on Capital Economics’ forecast that UK GDP will return to its February 2020 level – before the pandemic – in October.
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This notice was published: 2021-07-23 11:46:06