Britain’s economy only recovered to its
pre-pandemic size in November, before being hit by the highly infectious
omicron variant which led to government advice to work from home and
restrictions on hospitality in Scotland and Wales.
“Consumer services have borne the brunt
of ‘Plan B’ restrictions and general omicron caution, with activity here
shrinking sharply,” CBI economist Alpesh Paleja said.
The CBI’s monthly growth index – which is
based on quarterly growth rates from its previously published surveys of
manufacturers, retailers and other services businesses – fell to +12 in January
from +21 in December.
That was the lowest reading since April’s,
which covered a three-month period when pubs, restaurants and non-essential
retailers were largely closed due to a previous COVID wave.
COVID-19 cases in Britain have fallen sharply
since a peak in early January, and most economists think output will soon
recover.
But there are headwinds for many businesses
from sharply rising inflation, which hit its highest in nearly 30 years in
December and is forecast to exceed 6% in April when regulated household energy
bills rise.
“Consumer-facing firms will also have to
contend with a deepening squeeze on household budgets,” Paleja said.
The Bank of England is expected to raise
interest rates on Thursday to 0.5% from 0.25%, the second increase in less than
two months.
The CBI survey was based on responses from 477
firms between Dec 20 and Jan 17.
