UK manufacturers helped to push the UK’s economic recovery ahead of the global benchmark at the end of 2020, according to the latest research from Lloyds Bank.
The Lloyds Bank UK Recovery Tracker, which provides monthly insight into the shape and pace of the UK’s recovery from COVID-19, found that the manufacturing industry was the biggest contributor to UK growth in the final month of the year.
In particular, firms in the chemicals, household products and food and drink sub-sectors greatly outperformed their global benchmark in December due to a spike in demand from overseas buyers ahead of the EU Exit deadline.
Looking ahead, positive news about COVID-19 vaccines meant that most UK business sectors remained more optimistic about future growth than their global peers. The industrial goods sub-sector was among those most optimistic compared to the global benchmark, driven by a more positive outlook for the construction industry and expectations of increased investment in industrial development.
However, growth expectations fell below the global average in the chemicals and food and drink sub-sectors due to concerns that demand would lessen after the EU Exit deadline. Manufacturers also reported concerns about a steep rise in shipping costs and global raw material shortages. Both factors are expected to increase prices charged in 2021 and therefore negatively affect competitiveness overseas.
Jeavon Lolay, Head of Economics and Market Insight, Lloyds Bank Commercial Banking, said:
“While this survey was conducted before the latest national lockdown was announced, it is still worth highlighting the vaccine-induced rebound in business confidence across the economy. It is clear that, for many firms, this represents the defining influence for their prospects in the year ahead.
“December’s data also highlighted the impact COVID-19 continues to have on global supply chains. Many manufacturers benefitted from a boost in overseas sales ahead of the Brexit trade deadline, but raw material shortages, rising input costs and distribution problems are making the sector’s road to recovery more challenging.”