UK faces double-dip recession as business activity PLUNGES in January

Britain is facing a double-dip recession as grim figures showed business activity plunging into the red again this month.

Closely-watched PMI data for the private sector showed a reading of 40.6 so far in January – with anything below 50 pointing to a contraction.

It was significantly worse than the expectations of analysts, who had predicted 46.1, underlining the devastating impact of the pandemic. 

Economists warned that a double-dip downturn is now firmly ‘on the cards’ after the fledgling recovery from the worst recession in 300 years was strangled by action to control a surge in cases.

Figures last week showed GDP dropping 2.6 per cent in November during the second England-wide Covid lockdown.

Any December rally will have been smothered by the harsh ‘tier’ controls in England, and the renewed blanket curbs in January.

Chris Williamson, Chief Business Economist at IHS Markit, said its ‘flash’ PMI for this month showed the crucial services sector had been hit ‘especially hard’.

However, in a crumb of comfort, he said the scale of the downturn was far less dramatic than last spring. 

‘A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards,’ he said. 

‘Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports. 

‘Worryingly, January also saw companies reduce headcounts at an increased rate again – albeit less so than seen between March and November. The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures. 

‘Encouragingly, the current downturn looks far less severe than that seen during the first national lockdown, and businesses have become increasingly optimistic about the outlook, thanks mainly to progress in rolling out COVID-19 vaccines. 

‘Business hopes for the year ahead have risen the highest for over six-and-a-half years, boding well for the economy to return to solid growth once virus restrictions ease.’