British business activity has contracted in November as a new wave of coronavirus restrictions hammered the huge services industry, but news of possible vaccines have boosted hopes for 2021, a survey showed on Monday.

An early “flash” reading of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI), a gauge of private sector growth, tumbled to a five-month low of 47.4 in November from 52.1 in October.

It is the first time the index has gone below the 50.0 growth threshold level since June.

A Reuters poll of economists had pointed to an even bigger decline to 42.5.

Britain’s economy is widely expected to contract in the fourth quarter – albeit by less than it did around the time of the first coronavirus lockdown – after Prime Minister Boris Johnson ordered a four-week lockdown for England.

Other parts of the United Kingdom have also imposed restrictions on businesses, including in hospitality and other face-to-face activities.

Those closures helped to push the services PMI to 45.8 from 51.4 in October.

But manufacturing, which was largely unaffected by the latest lockdown, accelerated with its PMI rising to 55.2, the joint-highest level since 2018.

The approach of a possible trade shock at the end of next month, when Britain’s post-Brexit transition deal with the European Union will expire, prompted clients of British factories to increase their orders to build up stocks.

That in turn lead to a sharp lengthening of supplier delivery times because of severe delays at British ports.

Looking ahead, the survey found managers were their most optimistic since March 2015, boosted by news of progress in developing vaccines for COVID-19.

Job losses across the private sector accelerated, although some of the reduction in employment was due to companies taking advantage of the government’s extended jobs protection scheme.


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