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Omicron Concerns and Growing Uncertainty Hit UK Economy

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Concerns about the potential impact of the Omicron variant of Covid-19 and the accompanying uncertainty for businesses has already had a significant impact on the UK economy.

According to the latest purchasing managers’ index (PMI) data, activity among businesses across the country sank to a 10-month low in December as various public health measures and restrictions were reintroduced.

The figures from IHS Markit and the Chartered Institute of Procurement and Supply show PMI numbers down sharply from 57.6 in November to 53.2 in December.

That shift is being attributed to “tighter pandemic restrictions and renewed business uncertainty,” with consumer-facing businesses suffering particularly due to decreases in spending.

In recent weeks, Brits were told by the prime minister that they should work from home if they can, which has quickly had an impact on an array of service providers that rely on in-person trade and footfall.

As the main driver of the UK economy, falling activity within the services sector is expected to have a particularly significant impact on overall GDP numbers for the final weeks of 2021 and the early part of next year.

“It is looking highly likely that GDP will drop in December and January, driven by declines in consumer services activity,” commented Samuel Tombs, chief economist at Pantheon Economics.

Several major business lobbying groups have been calling on the government to step in and support enterprises across the country as the Omicron variant spreads and consumer spending retreats.

Kate Nicholls from UKHospitality has said businesses in her sector “desperately need support” if they are to survive the latest wave of coronavirus cases and the restrictions it makes necessary.

The Confederation of British Industry (CBI) has urged the government to take whatever actions are necessary to restore confidence among businesses and to offer companies “more headroom to manage their coronavirus debt repayments”.

Meanwhile, the British Chambers of Commerce (BCC) has said it wants to hear soon about what financial packages the government will be offering struggling businesses.

“With the UK recording its highest ever number of Covid cases in a single day [on December 15], and this being set to rise further in the coming days and weeks, businesses now face the two-punch combination of serious issues with staff absence and plummeting consumer confidence,” noted the BCC president Baroness Ruby McGregor-Smith.

“A great number of sectors have been impacted by restrictions already and the number of firms at risk is growing every day.”

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