Early signs of disruption caused by the UK’s departure from the European Union are emerging in economic data.
Although the biggest problem for many companies remains the Covid pandemic, details of recent surveys show that Brexit is adding to the strain on the economy. Manufacturers and services firms have been hit hard by supply chain and export disruption, according to data company IHS Markit.
British factories reported the steepest increase in supplier delivery times among the six “flash” preliminary Purchasing Managers’ Index (PMI) surveys published by IHS Markit for the UK, France, Germany, Japan, Australia and the United States.
Brexit: Boris Johnson fails to have his cake and eat it
“This was almost exclusively linked to both Brexit disruption and a severe lack of international shipping availability,” IHS Markit said.
Gita Gopinath, chief economist at the International Monetary Fund, has said Brexit disruption in the first quarter of 2021 is likely to reduce UK economic output by around 1 per cent.
Services companies – which account for the bulk of the UK economy and generate a surplus in trade with the European bloc – were hit this month, the IHS Markit survey showed.
Services exports deteriorated faster in UK than in any of the other six flash PMIs published this month, bucking a trend of improvement seen in most countries.
Scots inshore fishermen say they warned about Brexit turmoil
“The service economy was hard-hit by restrictions on trade and reduced consumer spending at the start of the year,” IHS Markit said.
Following the initial disruption, a truer picture of the costs and benefits of Brexit is likely to emerge over time, although many businesses are not hopeful.
A Confederation of British Industry survey published last week showed British manufacturers’ confidence in their ability to compete in the EU market has fallen to its lowest level since records began 20 years ago.
Scotch whisky giant hails US performance as sales beat forecasts
Diageo boss Ivan Menezes
Scotch whisky giant Diageo has signalled its expectation of “ongoing volatility and disruption”, notably in the on-trade, as it beat analysts’ forecasts to post a rise in underlying sales in the first half of its financial year.
The Johnnie Walker and Guinness maker reported a 1 per cent rise in organic net sales for the six months ended December 31, despite a “significant impact” in the travel retail and on-trade sector linked to coronavirus restrictions. It reported a bumper 12.3% rise in sales in North America, which offset declines in other markets; performance in Africa was “broadly flat”.
Diageo overcomes travel slump to beat sales forecast
EasyJet calls for exit plan to rescue summer travel season
EasyJet has urged governments to set out a plan for easing Covid travel restrictions as the budget airline warned its prospects had worsened for January to March.
Chief executive Johan Lundgren said he could not forecast demand this summer after the company reported an 88 per cent slump in revenue to £165 million for the three months to the end of December.
Markets drop amid worries of travel restrictions
He called on governments to clarify on how and when travel restrictions would be removed to allow passengers to make bookings, saying easyJet was confident there was pent-up demand for holidays.
“The key thing is really that they have a plan and as soon as possible let people know and how they’re going to unwind these things,” he said.
You can now have the bulletin and the top business news stories sent direct to your email inbox twice-daily, and Business Week for the weekly round-up on Sunday: