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Hold back of recovery

Consumer-facing companies such as shops, restaurants and bars remained 5.2 per cent below pre-pandemic levels. Still, all other services, including the public sector, were said to be 1.4 per cent higher than they were in February last year. 

Capital Economics said that the GDP figures were disappointing and suggested that the economy had “slowed to a crawl” even before the Omicron variant emerged late last month. 

Yael Selfin, a chief economist at KPMG UK, said that she expected the MPC to keep interest rates at the historic low of 0.1 per cent next week before raising borrowing costs in February. 

According to official figures, the economy grew by 0.1 per cent in October, compared with its 0.6 per cent expansion in September. 

Output in the construction sector fell by 1.8 per cent in October because of bottlenecks in global supply chains and rising input costs. 

Services activity rose by 0.4 per cent in October after an increase in face-to-face appointments in GP surgeries boosted the healthcare sector. 

The ONS said that the healthcare sector had grown enormously and that the economy had been boosted further by surging second-hand car sales and a vibrant jobs market. 

Mike Cherry, national chairman of the Federation of Small Businesses, said the economy had been “struggling to get into gear” even before the new restrictions were put into place. 

Sterling dipped to $1.321 by mid-morning after the Office for National Statistics’ figures were published, with investors taking the weak growth as a fresh sign that the Bank of England will hold off raising interest rates after the meeting of its monetary policy committee next week. The statistics office said that there had been “notable falls in house-building and infrastructure work” as companies struggled to find supplies of raw materials. The sector peaked in April at 0.9 per cent above its pre-Covid level but is now 2.8 per cent smaller. “The government’s Plan B Covid-19 restrictions could be the difference between the economy growing or contracting in December,” the consultancy said. Some services companies earned extra revenue from increased staff employed in cleaning, building and security jobs and activity in the arts and entertainment sector picked up as theatres fully reopened. Manufacturing remained flat month-on-month, but activity in mining and quarrying fell by 5 per cent because of the timing of maintenance in oil fields this summer. The production sector, including gas and electricity supply, manufacturing and mining, shrank by 0.6 per cent in October. 

Rishi Sunak said that the government had “always acknowledged there could be bumps on our road to recovery. “Plan B will add to existing consumer concerns about the spread of Omicron, further dampening an already suppressed appetite for festive celebrations,” he said. The federation said that many of its members had suffered a “fresh flurry of cancellations”.

Summarised www.sba.tax

 

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