The construction sector suffered in 2020 like more other industries in the UK, but the second half of the year saw it begin to recover, as house-building numbers rose and new workers were hired. Meanwhile, the pandemic has led to many financial companies running the risk of going out of business.
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The IHS Markit/CIPS construction purchasing managers’ index is a key figure in this respect, as any figure above 50 shows us that the sector is growing. For December, it came back as 54.6, having been 54.7 in November. House-building led the way at 61.9.
This was the seventh consecutive month of growth in construction, but perhaps more important is the fact that building firms have been hiring new workers for the first time in over 20 months. The industry’s return to modest jobs growth came as it was reported that Brexit disruption is causing delays in the supply of building materials.
In the EU, the construction sector suffered a tenth successive fall. Meanwhile, Tim Moore, who is an economics director at HIS Market, said that in the UK we are currently seeing the “most optimistic growth expectations since April 2017”.
Thousands of Financial Firms Could Be in Danger
It isn’t good news across the full British economy, though. The Financial Conduct Authority (FCA) has pointed out that about 4,000 financial firms in the country could fail due to the impact of the coronavirus pandemic.
They surveyed 23,000 companies in the financial sector at the end of October, to find out how they were coping with the issues that 2020 caused. The survey revealed that 4,000 firms have “low financial resilience” and currently have a “heightened risk of failure”.
Sheldon Mills is the FCA’s executive director for strategy consumers and competition. He said that the most-affected businesses are mainly those that are small and medium-sized, with 30% of them at risk of failing.
Some of the worst-hit firms are the likes of insurance brokers and investment management companies, who witnessed a large drop in liquid cash assets in 2020. The payment of collection agency fees to recover money owed to firms has become a feature of the economy since the current crisis began.
However, the FCA pointed out that the survey was taken before the furlough scheme was extended, and before the latest positive news on a vaccine rollout. Therefore, it is possible that this situation has improved since then.
In addition, they only looked at the companies regulated by the FCA, with the biggest financial firms regulated by the Bank of England’s Prudential Regulation Authority instead.
Another piece of research comes from Goldman Sachs, who are predicting that the UK economy will shrink by 1.5% between January and March due to the latest lockdown restrictions. This would make it a smaller drop than seen last spring, due to factories staying open.
They stated that the unpredictability associated with the new strain of the virus poses the risk that the economy could be even more deeply affected. However, they still believe that Spring 2021 will mark a sharp up-term in activity, particularly in the services sector. Looking ahead, they predict growth of 5.6% in 2021 and 6.4% in 2022.