Omicron hits UK economic growth as dining out tumbles – business live
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Economic growth across the UK has slowed to its weakest point since last spring’s lockdowns, as the omicron variant of Covid-19 hits confidence.
The CBI’s latest survey of private sector growth, released this morning, shows that growth in the three months to December dipped to its lowest since April.
Its index of private sector growth fell to +21% vs +32% last month, with business and professional services, consumer services and distribution firms all reported slower growth.
The slowdown coincided with the discovery of Omicron, and the introduction of measures to slow its spread which have hit hospitality and retailers hard.
And looking ahead, growth is expected to keep slowing, with consumer services firms expecting activity to decline in the next three months. That would drag on the economy, which is still 1.5% below its pre-pandemic levels, and was already slowing over the summer before Omicron hit:
Alpesh Paleja, CBI Lead Economist, says the UK’s growth outlook has deteriorated – and struggling firms may need more help.
“Substantial challenges remain for businesses heading into Christmas: labour and materials shortages, rising costs and new Covid measures are restricting business’ ability to trade during this crucial period.
“With uncertainty rising – associated with the sharp rise in Omicron cases – it’s no surprise that the near-term growth outlook has dampened. The new support measures announced by the Chancellor provided welcome breathing space to boost confidence and will help hospitality and leisure businesses to keep their doors open.
“But with the potential of further measures still weighing on firms, the Government must monitor the situation closely and ensure that any new restrictions go in lock-step with further targeted cashflow support to those struggling firms.”
Yesterday, Ryanair more than doubled its annual loss forecast and cut its January traffic capacity by 33%, warning that the latest travel restrictions have hit takings.
But investors are hopeful that this latest variant may be less virulent than feared, after two studies indicated that people with Omicron are less likely to be hospitalised than those with the Delta variant.
In what was described by scientists as a “qualified good news story”, two studies on Wednesday pointed to a lower risk of hospitalisation with Omicron. A UK study showed that Omicron has a 20%-25% reduced chance of a hospital visit and at least a 40% lower risk of being admitted overnight.
A separate, preliminary analysis of Omicron cases in Scotland concluded that the risk of hospitalisation may be 70% lower with Omicron than Delta.
Shares have rallied in Asia-Pacific markets today, following gains on Wall Street and in Europe last night. Japan’s Nikkei has jumped 0.8%, while China’s CSI 300 is 0.6% higher, and South Korea’s Kospi has gained 0.5%.
European markets are set to open higher too.
Europe’s energy crisis is deepening too, with suppliers warning that “stratospheric” wholesale gas and power prices threaten a “national crisis” in Britain (more on that shortly).
- 9am GMT: Italian business confidence for December
- 9.30am GMT: Economic activity and social change in the UK, real-time indicators
- 1.30pm GMT: US weekly jobless claims
- 1.30pm GMT: US Personal Consumption Expenditure index of price rises in November
- 3pm GMT: University of Michigan survey of US consumer confidence