COVID-19: Vaccine hopes 'lift business confidence to highest level since March 2015'
A slew of survey data suggests there has been a leap in optimism about the year ahead among businesses despite Brexit uncertainty.
Thursday 3 December 2020 12:29, UK
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 following its approval by regulators.
Live COVID updates as UK prepares for vaccine rollout
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."
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."