Omicron taking its toll on the economy, warns CBI
Its survey of 516 firms between November 22 and December 14 produces an index score of just +21, down from +32 last month.
On Wednesday, official figures from the ONS showed the economy was slowing even before the impact of Omicron was felt. GDP for the quarter to September was rising at just 1.1%, lower than previous estimates.
That would seem to put the economic recovery in doubt.
According to the CBI, only manufacturers saw an acceleration in growth in the three months to December (+29%, up from +17%), while business and professional services (+16% , down from +40%), consumer services (+23% from +28%) and distribution firms (+21% from +32%), all reported slower growth.
Alpesh Paleja, CBI Lead Economist, said: “Substantial challenges remain for businesses heading into Christmas: labour and materials shortages, rising costs and new Covid measures are restricting business’ ability to trade during this crucial period.
“With uncertainty rising – associated with the sharp rise in Omicron cases – it’s no surprise that the near-term growth outlook has dampened. The new support measures announced by the Chancellor provided welcome breathing space to boost confidence and will help hospitality and leisure businesses to keep their doors open.”
Businesses and consumers are plainly worried about possible lockdowns after Christmas that would restrict spending.
That has clear implications for the Bank of England, which last week felt it had to move interest rates up to quell inflation.
With inflation showing no sign of stopping – everything from rail fares to council tax to pints in pubs are on the up – the Bank will remain under pressure to do more rate rises next year.
That would further hit growth as firms face higher debt repayments.
City economists are pondering whether to rethink their growth forecasts for next year in light of developments.
