By William Schomberg
LONDON, Dec 16 (Reuters) – British businesses have reported some renewed momentum after months of worry about possible tax increases in finance minister Rachel Reeves’ budget in late November, a closely watched survey of the private sector showed on Tuesday.
The composite S&P Global Purchasing Managers’ Index rose to 52.1 in its preliminary measure for December from 51.2 in November, above all forecasts in a Reuters poll of economists but still below its long-term average.
The survey represented the first comprehensive gauge of the economy since Reeves announced 26 billion pounds in tax increases in her budget on November 26 but delayed the introduction of most of them and spared employers the kind of hit they took in her first budget last year.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said businesses had been buoyed in part by the lifting of the uncertainty although the survey implied economic growth of only 0.1% in the fourth quarter.
“It’s a big relief that business confidence has not slumped in a repeat of last year’s post-budget gloom,” Williamson said.
“However, the overall pace of output and demand growth remains lacklustre, and the expansion is still very dependent on technology and financial services activity, with many other parts of the economy struggling to grow or in decline.”
The PMI’s overall reading and one for the dominant services sector were both the highest in two months, while the measure of manufacturing was the strongest in 15 months.
New work grew at the fastest pace since October last year and the survey’s measure of expectations for the 12 months ahead rose to its second-highest level in more than a year albeit still below the long-term average.
New work from abroad rose after falling for 13 months and backlogs edged up for the first time in almost three years as suppliers struggled to respond to the pickup in demand.
But staffing levels were cut again as employers responded to the higher costs of hiring which went up earlier in April due to a tax increase ordered by Reeves.
Inflation pressures increased with the prices of inputs – including labour costs – accelerating for the second month in a row while prices charged by firms also went up after touching a five-year low in November.
The Bank of England looks set to cut interest rates on Thursday for the first time since August. But the Monetary Policy Committee’s vote is expected to be tight as some policymakers are worried about inflation pressures still embedded in the economy.
(Writing by William Schomberg)
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