Coronavirus threat bugs UK economic recovery

The service, construction and manufacturing sectors in the UK economy have all made unexpectedly healthy starts to 2020, but growth is now being threatened by the threat of the coronavirus to global trade.

On Wednesday, data firm Markit reported that its purchasing managers' index (PMI) for services in February stood at 53.2 in an index where a reading above 50 represents growth. The figure, however, was slightly down on January's 53.9 - a fall directly attributed to the spread of the virus across the world."There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets. The loss of momentum for incoming new business also contributed to the sharpest drop in backlogs of work since last September, " reported Markit.Chris Williamson, chief business economist at IHS Markit, added: "On one hand, February saw future output expectations climbing to the highest for over four and a half years as firms remained optimistic that reduced political uncertainty in particular will help drive further growth. On the other hand, the survey also highlights the risks to the economy from the coronavirus."The outbreak was linked to reduced tourism numbers and lower travel and transport business volumes, but was also seen as having a wider hit to demand via reduced confidence and financial market volatility, as well as through supply shortages limiting the ability to fulfil orders."Uncertainty regarding the UK’s trading relationship with the EU also lurks in the background as a risk to exports." 
Meanwhile, this week's PMI for the construction industry in February showed output rising at its fastest rate in more than a year, jumping to 52.6 from 48.4 in January. New orders rose at their fastest pace since 2015.“As the blocks of December’s election and Brexit uncertainty were largely removed, it was the residential sector that was the main winner with the fastest escalation in housebuilding since July 2018,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.Tim Moore, economics director at IHS Markit, said: “While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.”For manufacturing, last month's PMI for manufacturing rose to 51.7, up from 50.0 in January. But, again, the global impact of coronavirus was seen to be weighing on a post-election recovery in the sector, with factories reporting a surge in delays in their supply chains.Rob Dobson, a director at IHS Markit, said new orders grew at their fastest pace in 11 months and business optimism had hit a nine-month high. But he added manufacturers were still in recovery mode after Prime Minister Boris Johnson’s election win in December, which had lifted some of the uncertainty hanging over the country’s economy. Subscribe to Relocate Extra, our monthly newsletter, to get all the latest international assignments and global mobility news.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory

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