The UK economy showed welcome signs of steadying in February after the severe slump seen in January, albeit with business activity remaining sharply lower than late-last year due mainly to the ongoing national lockdown.
Although the hospitality sector, including hotels and restaurants, reported a further steep decline, as did the transport and travel sector, rates of contraction eased considerably. Business and financial services companies meanwhile recovered to register modest expansions, helping the hard-hit service sector to come close to stabilising.
In contrast, the manufacturing sector’s performance worsened amid escalating Brexit-related export losses and supply chain disruptions. More than half of all companies reporting lower exports attributed to the decline to Brexit-related factors. Brexit was also the most commonly cited cause of supply delays.
More encouragingly, although the data hint at a renewed contraction of the economy in the first quarter, business expectations for the year ahead improved to the highest for almost seven years, suggesting the economy is poised for recovery. Confidence continued to be lifted by hopes that the vaccine roll-out will allow virus related restrictions to ease, outweighing concerns among many other firms of the potential further damaging impact of Brexit-related trading issues.