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UK businesses shuffle back to growth in December -PMI

LONDON, Dec 16 (Reuters) - Britain’s economy limped back to growth this month following November’s four-week lockdown in England, but hospitality businesses still struggled with COVID restrictions and Brexit disruption hit factory supply chains, a new survey showed.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index for the services and manufacturing sectors rose to 50.7 in December from November’s 49.0.

This is above the 50 level that separates growth from contraction but a smaller recovery than the 51.3 forecast in a Reuters poll of economists.

“The recovery lacked vigour,” IHS Markit chief business economist Chris Williamson said.

“Consumer-facing services, notably hotels, restaurants and tourism, reported further marked declines in output, largely offsetting renewed growth in business services, transportation and manufacturing,” he added.

Last month the Bank of England forecast Britain’s economy would shrink 2% in the fourth quarter, after suffering a record 20% hit during the first lockdown in the three months to June.

The flash services PMI rose to 49.9 from November’s five-month low of 47.6, a smaller rebound than forecast.

Most British pubs and restaurants still face major restrictions or outright closure as the government tries to limit a surge in COVID-19 cases before a planned relaxation of rules to allow families to gather at home over Christmas.

The headline flash manufacturing PMI hit a three-year high of 57.3, up from 55.6 the month before.

But much of this reflects distortion from rising raw materials costs and lengthening delivery times - normally a sign of a recovering economy but in this case reflecting stockpiling before European Union trade barriers come in on Jan. 1.

The index measuring factory output showed the weakest growth since June.

“Shortages of critical inputs, alongside pressure on capacity following forward-purchasing by clients ahead of Brexit, contributed to the sharpest rise in backlogs of work across the manufacturing sector since May 2010,” IHS Markit said.

Goods transported between Britain and the EU will face new customs checks from Jan. 1 after a post-Brexit transition period ends, and Prime Minister Boris Johnson has so far been unable to reach a deal with the EU to avoid new tariffs too. (Reporting by David Milliken; Editing by Catherine Evans)

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