UK businesses feel pressure from Omicron - Lloyds survey

Reuters

Published Dec 20, 2021 07:09PM ET

By David Milliken

LONDON (Reuters) - British business confidence began to feel the impact of the Omicron variant of coronavirus this month, alongside further upward pressure on prices and staffing costs, a survey showed on Tuesday.

Lloyds (LON:LLOY) Bank said its monthly business confidence survey, conducted between Nov. 26 and Dec. 10, held steady at 40% this month, well above its long-run average of 28%.

However, responses weakened in the second week of the survey when the impact of the Omicron variant began to become clearer, with sentiment falling back to 32%, similar to during the spring and summer.

Last week IHS Markit purchasing managers' data showed activity growth fell to a 10-month low this month.

"Businesses face into a number of headwinds and challenging trading conditions, including higher interest rates, as we move into 2022, but many remain resilient and hopeful that acute downside risks are not realised," said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking.

The Bank of England raised its main interest rate to 0.25% from 0.1% last week - despite seeing a short-term hit to growth from Omicron - and its chief economist said further rate rises were likely if price pressures did not ease.

Lloyds survey showed 45% of businesses expected to raise prices in December, up from 44% in November, as wage pressures - an especial concern for the BoE - increased further.