Dear All,
Due to a cessation of government communications following the death of HRH The Prince Philip, Duke of Edinburgh my usual sources of information have been reduced.
I have detailed below some economic updates with a few headline stories.
Have a good week.
Gordon Polson
Chief Executive
Federation of Bakers Ltd
CBI Quarterly Guide to the UK economy; making sense of the key trends and what’s driving them.
Quarterly highlights:
UK economy shrinks in January due to third lockdown – UK GDP shrank by 2.9% m/m in January (after growing by 1.2% in December) due to the most recent lockdown. This left the economy 9% smaller than it was in February 2020
GDP set to slip back over Q1 2021, but to a lesser extent – UK GDP is expected to drop in Q1 2021 due to lockdown and temporary UK-EU trade disruption. The decline is anticipated to be less steep than in the first lockdown in Spring 2020, due to households and businesses being better adapted to operate under COVID restrictions
Vaccine rollout and easing of restrictions set to fuel recovery – The vaccine rollout and easing of COVID restrictions, in addition to the extra fiscal support from the March Budget, is expected to fuel a strong recovery in GDP from Q2 2021 onwards.
UK Manufacturing PMI Increased to 58.9 in Mar’21
According to data published by IHS Markit⁄CIPS, seasonally adjusted UK manufacturing purchasing managers’ index (PM) increased to 58.9 in mar’21, reporting the highest PMI index since feb’11.
The data indicated that the upturn in the index has been supported by improved growth of output, new orders and employment. The slower decrease in stock purchases compared to feb’21 also contributed to the growth in PMI index. The sector witnessed an increase in inflows of new business from domestic as well as overseas markets.
In mar’21, manufacturing output increased for the tenth successive month, with the highest pace reported since nov’20. The output growth was facilitated by an improvement in new order intakes, the vaccine roll-out and preparations for the planned relaxation of lockdown restrictions.
The data indicated accelerated growth in the intermediate and investment goods industries. Additionally, consumer goods production reported an expansion in mar’21 following back-to-back contractions in previous months.
‘Superdeduction’ tax incentive expected to boost investment in the manufacturing sector in 2021
According to a report released by Make UK, the introduction of the ‘superdeduction’ tax incentive is expected to boost investment in the manufacturing sector in 2021. The report is based on a survey conducted with 149 companies from 17th-24th mar’21.
The survey indicates that 22.6% of the companies plan to increase investment as a direct response to the ‘superdeduction’ tax, while 28.1% of companies plan to bring forward their investment plans in 2021.
A rise in business confidence from the budget 2021, especially among mid-size and larger companies, is also expected to boost investment in the sector. The survey indicated that 19.6% of companies reported an increase in business confidence from the budget.
The survey also highlighted that 55.3% of companies have accepted the planned increase in corporation tax as it is expected to have no impact on overseas or company investment plans.
Selected Headlines
British industry has been warned to brace for weeks of disruption as the impact of the Suez canal blockage hits UK ports. The disruption could reportedly affect food imports.
The covid pandemic has resulted in online grocery shopping becoming consistently profitable for conventional UK supermarkets for the first time.
Optimism among business leaders is at a record high, based on hopes that Britons will commence a multibillion-pound summer spending frenzy after being freed from lockdown.
The UK government has announced a £30m investment to boost batteries and hydrogen vehicles
Gerry Grimstone, Minister for Investment in the UK, announced a £30m investment to support pioneering research into battery technology, the electric vehicle supply chain and hydrogen vehicles. Through the funding, the government aims to support its plan to phase out the sale of petrol and diesel cars by 2030 and build back greener from the pandemic.
As part of the funding, 22 studies will receive a share of £9.4m of the fund. The studies will aim to develop a lithium extraction plant in Cornwall, a plant to produce specialised magnets for electric vehicle motors in Cheshire and a lightweight hydrogen storage for cars and vans in Loughborough. Additionally, the government-backed Faraday Institution is committing the first year of a £22.6 million programme to continue its work on the improvement of the safety, reliability and sustainability of batteries.
Investment in battery technology is expected to improve performance and reduce costs of electric vehicles for motor companies. It is also expected to support the creation of new jobs, new industries and the development of technologies in automotive and energy industries in the UK
