Hope for virus-hit UK economy despite sales slump

Retail sales in Britain tumbled and government borrowing soared in January after the country re-entered lockdown over the coronavirus pandemic, official data showed Friday.

But signs that the worst could be over came in separate figures showing the UK economic slump slowed in the first half of February.

Retail sales plunged 8.2 percent last month compared with December, the sharpest fall since April 2020, the Office for National Statistics (ONS) said in a statement.

“All sectors saw a monthly decline in volume sales… except for non-store retailers and food stores,” the ONS added.

Separate ONS figures showed government net borrowing hit £8.8 billion ($12.2 billion, 10.1 billion euros) in January, a record for the month and the first January deficit for a decade.

The closely-watched Purchasing Managers’ Index (PMI) looking at services and manufacturing meanwhile stood at 49.8 in February, with anything below 50 seen as contraction.

However this was a big improvement on January’s level of 41.2, according to compiler IHS Markit.

“The UK economy showed welcome signs of steadying in February after the severe slump seen in January, albeit with business activity remaining sharply lower than late-last year due mainly to the ongoing national lockdown,” noted Chris Williamson, chief business economist at IHS Markit.

While manufacturing grew, services contracted sharply, the PMI data showed.

Prime Minister Boris Johnson on Monday plans to lay out a roadmap for easing a third stay-at-home order in England, which has shut down schools, non-essential businesses and hospitality venues since early January.

While Britain is rolling out millions of vaccine doses to adults deemed the most vulnerable, it is one of the world’s worst-hit countries regarding deaths from Covid, with around 120,000 to date.

– Soaring debt –

Finance minister Rishi Sunak on Friday reiterated the need for Britain to return to “a more sustainable footing”, as he prepares for his annual budget next month.

UK debt has rocketed over the past year, largely as the government pays the bulk of wages for millions of private sector workers.

Sunak said in a statement that investing more than £280 billion in state funds to protect jobs, businesses and livelihoods under its furlough scheme “is the fiscally responsible thing to do”.

He added however that “it’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this”.

Since April 2020, or soon after the UK’s first virus lockdown, public sector net borrowing has ballooned by £270.6 billion, the ONS said Friday.

Overall public sector net debt stands at £2.1 trillion, or around 98 percent of Britain’s total annual economic output.

Britain’s economy shrank by a record 9.9 percent last year but the rapid vaccines rollout has boosted the outlook.

Activity was hampered also by Brexit turmoil ahead of Britain’s final exit from the European Union.

Much of the UK re-entered lockdown in early January to curb a variant Covid-19 strain that was deemed more transmissible.

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