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Business fears edge down but stay high - BoE survey

By Sean Farrell

Date: Thursday 03 Dec 2020

Business fears edge down but stay high - BoE survey

(Sharecast News) - Business uncertainty edged down but remained high in November as good news on Covid-19 vaccines bolstered sentiment, a Bank of England survey showed.
Overall 67% of finance chiefs contacted by the BoE said economic uncertainty was high or very high, down from 75% in October but well above the 41% reading at the start of 2020. Covid-19 remained the largest source of uncertainty.

Businesses estimated sales in the fourth quarter of 2020 would be 15% lower than they would have been without Covid-19. The reading was an improvement on the 18% shortfall reported in October for the third quarter and unchanged for the fourth quarter.

The impact on sales was estimated to ease to -11% in the first quarter of 2021 and -2% in the second quarter. Both scores were improvements on October's survey.

The BoE noted that the survey coincided with announcements from Pfizer and Moderna that their Covid-19 vaccines were effective. The vaccines have raised hopes that the economy could reopen fully in 2021 and that the pandemic will come to an end.

Susannah Streeter, an analyst at Hargreaves Lansdown, said: ''The vaccine breakthroughs have given businesses a shot of confidence that the economy will warm up faster from the cold shock of Covid. Although optimism is slowly seeping back into boardrooms, worries still reign with 67% of businesses saying the overall economic uncertainty remains high."

Businesses were less pessimistic about Covid-19's impact on employment after Chancellor Rishi Sunak extended his furlough programme until the end of March from the end of October.

In November, finance chiefs said employment would be 6% lower than in a no-Covid scenario in the fourth quarter and the first quarter of 2021. The respective scores were -8% and -9% in October and the score for the second quarter of 2021 improved from -7% to -3%.

Estimates for investment worsened with respondents saying investment would be 25% lower than without Covid-19 compared with -20% in October. Investment expectations for the first quarter of 2021 were also down but were unchanged for the second quarter.

Businesses reported an increase in preparedness for the end of the Brexit transition period with the UK and EU still locked in talks with four weeks to go. In November 68% of finance chief said they were fully prepared or as ready as they could be - up from 55% a month earlier.

The BoE conducted the survey from 6 to 20 November and received 2,964 responses.



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