New data paints mixed picture for the UK's recovery but 2022 predicted to be challenging

Mon 8 Nov 2021
Posted by: William Barns-Graham
Trade News

UK recovery

British businesses’ output has fallen for the sixth month in a row to its lowest level since March when the country was still in lockdown, new data shows.

The BDO Output Index fell from 105.23 points in September to 103.35 points in October as supply chain problems combined with energy price rises and labour shortages.

BDO’s manufacturing index also dropped two points to 97, nearing the 95 mark which indicates declining output, according to the Guardian.

The services sector also dropped by 1.85 points to 104.15 in October.

Difficult winter

Kaley Crossthwaite, a BDO partner, said businesses are facing a tough winter.

“Between rising inflation and a lack of staff, 2022 could be a difficult year for companies who have been forced to prioritise short-term problems over long-term growth,” she said.

“At the same time, consumers are beginning to see the impact of these shortages, with rising fuel and energy prices, which may in turn lead to cutbacks in discretionary spending,” she added.

Growth around the corner

The CBI’s latest SME Trends Survey was slightly more positive, showing that, although growth slowed over the past three months following July’s record rise in output, it remains solid in comparison to longer-term trends.

It is also expected growth to pick up again in the coming quarter.

Confusing figures ahead

According to the FT, those watching the UK’s recovery will be faced with confusing figures this week as the ONS release quarterly and monthly figures for GDP.

The reports use different methodologies resulting in inconsistent pictures of the state of the recovery.

Quarterly figures show the UK economy still some distance short of its pre-pandemic size, while monthly figures are likely to show that the economy is almost back on track.

Policy impact

Liz Martens, UK economist at HSBC, said the confusion prevented an accessible and understandable metric for how well the economic recovery was going.

“The statistics are essentially giving us two quite different sets of answers to those questions,” she said.

“That makes a difference for policymakers: it affects the OBR’s projections for borrowing, and the BoE’s decision making on whether or not to raise rates.”