UK Business Confidence Holds Up on Vaccine Rollout

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The Lloyds Bank Business Barometer - a key insight into business confidence - has fallen in January, however levels of confidence are still more elevated than they were for most of 2020.

Confidence amongst businesses rose sharply in December amidst the rollout of vaccines in the UK and expectations for a Brexit deal to be reached by the EU and UK.

A third nationwide lockdown, and new variants of covid-19 being discovered, dented confidence in January.

Business confidence fell slightly by 3 points to -7% in the New Year, "revealing concerns about the impact of new strains of the coronavirus on trading prospects and the wider economy," says a report from Lloyds Bank.

The high-street lender says the setback in January was relatively small and only partly reversed the 17-point rise in December resulting from vaccine optimism.

"Confidence is still the second highest since last May’s low point, suggesting that vaccine hopes are trumping unease about new variants of the coronavirus," says the report.

Above: Business confidence only partially reverses last month's rise

The UK's pace of vaccine rollout remains firm with the country on target to have delivered at least one dose to the country's most vulnerable groups by the middle of February.

Should the data allow, the UK government has said it will then proceed with easing restrictions and the hope amongst businesses and investors alike is that the next unlocking will be a more permanent one.

Above: Employment prospects remain negative, but less than last spring

"Confidence is still the second highest since last May’s low point during the first lockdown period and it suggests that the hopes surrounding the vaccine rollout are trumping worries about the new variants," says the report.

In a boost to the UK outlook, pharmaceutical firm Novavax announced on Thursday that its Phase 3 drug trials had shown significant efficacy against the UK- and South African-identified variants of the coronavirus.

The findings will ease concerns about the mutations, with Novavax saying it was already in the process of updating its vaccine to account for the South African variant.

Production of at least 60 million doses of the vaccine will start in the UK, should the vaccine receive regulatory approval.

The Lloyds Business Barometer meanwhile showed a relatively muted concern with regards to the new trading relationship between the UK and the EU.

6% of surveyed businesses reported serious disruptions leading to delays or higher costs; a further 18% fear future disruption, rising to 28% for manufacturing.

"Nevertheless, confidence remains well below the long-term average of 28%, hence even with vaccine optimism, there may be a significant gap before sentiment returns to ‘normal’ pre-Covid levels," says the report.