In Focus Risk
Recovery is behind, but outlook brightens
The UK economy was showing continued signs of struggle as the year ended, but improvement may be on the horizon
Jeavon Lolay Head of economics and market insight, Lloyds Bank Commercial Banking
The pace of the UK’s economic recovery remained behind the global benchmark at the end of last year, according to the latest Lloyds Bank UK Recovery Tracker. However, news of the first effective
coronavirus vaccine buoyed business confidence for the year ahead. The Tracker, working with IHS Markit,
provides unique insight into the shape and pace of the UK’s recovery following the disruption caused by Covid-19.
UK sectors remain behind global benchmark, but ahead of Europe Eight of the 14 UK sectors monitored by the Tracker were behind the global index during November, the same number as in October.
Tourism and recreation businesses were
furthest behind the equivalent global benchmark, with a reading of 15.6 against the global benchmark for the sector of 44.0 as the national lockdown in England came into force. A reading above 50 signals output is
rising, while a reading below 50 indicates output is contracting. The beverages and food sector (39.9) also
fell further behind the equivalent global benchmark (52.4) in November, with producers citing a fall in orders from pubs and restaurants. Real estate (40.6) and transportation
Metals and mining led the growth rankings for the third month running (70.7), with automobiles and auto parts in second place again (63.3). Ten of the fourteen sectors monitored by the tracker saw overall output growth during November, with six recording faster output growth month-on- month
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(47.5) were the only other UK sectors monitored by the Tracker to register an outright decline in output during November. Lockdown measures compounded the fall in demand for commercial property rentals and public transport, as more people worked from home. While the UK overall remained behind
the global benchmark in November, it still outperformed the European benchmark, with 12 of the 14 UK sectors monitored by the tracker reporting a stronger output performance. Only tourism and recreation and
beverages and food were behind the European average.
Manufacturing firms help stop UK output falling to Q2 low UK national output fell for the first time
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in five months during November (49.0). However, the fall was not as steep as the drop measured in March (36.0), April (13.8) and May (30.0), during the first national lockdown. This is partly due to manufacturers being
able to operate as normal during the latest series of lockdown measures across the UK. Domestic manufacturers outperformed services businesses for a ninth consecutive month in November. Metals and mining led the growth
rankings for the third month running (70.7), with automobiles and auto parts in second place again (63.3). Ten of the fourteen sectors monitored
by the tracker saw overall output growth during November, with six recording faster output growth month-on-month. The biggest uptick was seen among
technology equipment manufacturers (61.3 vs 52.7 in October) and producers of household products (52.7 vs. 45.0 in October). The rise in UK technology equipment
output mirrored a worldwide rebound in the sector during November, led by the recovery of the global semiconductors industry, which improved trade flows and boosted demand. Manufacturers indicated that rising
output was partly driven by higher export orders in November, as European clients brought forward purchases before the end of the Brexit transition period.
January 2020
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