By David Milliken
LONDON (Reuters) – Britain’s rapid economic bounce-back from the coronavirus pandemic slowed sharply in July as a new wave of cases forced hundreds of thousands of workers to self-isolate under government rules to limit the spread of the disease.
Supermarkets and hauliers say staff shortages are making it hard to restock shelves and deliver goods, and Friday’s monthly purchasing managers’ index (PMI) data gave the first clear evidence of the scale of the impact.
The IHS Markit/CIPS flash composite PMI dropped to 57.7 in July from 62.2 in June, its lowest since March and a sharper fall than most economists had forecast in a Reuters poll.
“July saw the UK economy’s recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook,” Chris Williamson, chief business economist at IHS Markit, said.
Data was collected between July 12 and July 21.
Britain’s economy has bounced back sharply from its nearly 10% slump in 2020 when the country locked down for longer than many other European nations in a bid to counter one of the world’s heaviest coronavirus death tolls.
The slump in business activity seen in the PMI survey contrasts with a rise in consumer sentiment to its highest since before the pandemic, according to a survey published earlier on Friday.
However, households expressed greater concern about the economic outlook than a month before due to worries about COVID variants, rising inflation and reduced furlough support.
Other figures showed British retail sales volumes rose 0.5% in June to stand 9.5% above their pre-pandemic level, bolstered by a jump in food and drink spending as soccer fans enjoyed the Euro 2020 tournament.
COVID RESTRICTIONS EASE
Monday marked the end of most COVID restrictions on businesses in England, with nightclubs allowed to reopen, mask-wearing requirements largely scrapped and capacity restrictions lifted for pubs, restaurants and shops.
But the reopening has been called into question by critics of the government. It coincided with a surge in COVID cases driven by the Delta variant, and the knock-on impact as close contacts of people who tested positive were ‘pinged’ by a health service app asking for 10 days of self-isolation.
More than 600,000 people in England and Wales were told to self-isolate last week.
Businesses have called on the government to bring forward the scheduled Aug. 16 lifting of the isolation requirement for workers who are fully vaccinated or test negative for COVID.
Britain’s government plans to offer a limited exemption for up to 10,000 workers in the supply chain for food.
The fall in the PMI was greatest in the services sector, especially among transport and hospitality firms.
Orders growth was the weakest since February and business optimism fell to its lowest since October 2020, before news that effective COVID vaccines had been developed.
Brexit-related trade frictions and rising costs for staff and raw materials also hurt business morale and new orders this month.
Input costs rose at the fastest rate in more than 20 years and businesses increased the prices they charged at a pace only just below June’s record high.
The Bank of England is keeping a close watch on whether a jump in prices as economies reopen across the world risks proving more persistent than it initially forecast.
(Reporting by David Milliken; Editing by William Schomberg and Toby Chopra)
