Tag Archives: Omicron

News

UK manufacturing activity likely to improve further in 2022

Written by Mr. Kunal Sawhney, CEO, Kalkine Media

The manufacturing activity in the United Kingdom is likely to ameliorate further in the present calendar year as the pandemic-related hardships subside over the coming months. The domestic market sentiments have continued to improve in the terminal quarter of 2021, even as the Omicron-led fears forced the government of the UK to reimpose mask mandates, alongside some precautionary measures to contain the rate of infection.

Though the measures taken by the Downing Street administration have failed to help in lowering the rate of infection as the country reported record surges in daily infections with the daily count nearing 200,000.

With the onset of the new calendar year, the manufacturers are anticipating a fresh bounce back in the orders as existing challenges including the faltering supply chain and logistics activity, and short-staffed operations are expected to moderate further in the present quarter. On the other hand, the problem of higher input prices may stretch up to the first half of 2022 as the Bank of England has already warned that the rate of consumer price based inflation will peak in April of this year.

Given the persistent business environment due to the rapidly spreading Omicron variant and towering increases in the total number of infections on a daily basis, the enterprises handholding the growth of manufacturing sector may get affected if the government proceeds ahead with another nation-wide lockdown or strict set of reciprocatory measures including heightened border control, curtailed domestic movement and limiting the operations of local enterprises that have driven the major rise in the footfalls in the recent past.

If the government manages to bring down the rate of infection with the present set of restrictions then the manufacturers can swiftly escalate the rate of production, as a result of which national economic output can witness sustainable upsurge.

In the month of December 2021, the rise in number of new orders, production levels, along with the employment activity, collectively steered an increase in the factory activity with the Manufacturing PMI rising to 57.9. According to the seasonally adjusted data provided by IHS Markit/CIPS, the PMI remained above the mark of 50.0 for the 19th straight months as the overall pace of expansion improved to a four-month high.

However, the comprehensive pace of expansion was disturbed by the untimeliness of orders due to malfunctioned logistics systems and industry-wide limitedness of skilled workforce. The considerable increase in the levels of manufacturing output was thoroughly supported by the domestic enterprises as market operations of local enterprises continued to improve. The cross-border hardships were there as the new orders from overseas locations dropped for the fourth straight month, continuing the negative trend for export businesses.

According to the survey, the manufacturers have complained about the possibilities of further pandemic-induced restrictions, persisting post-Brexit difficulties and logistics challenges. All these factors combined once again hit the demand from overseas markets at the end of 2021. Nonetheless, the demand for capital goods manufactured in the UK from the international markets jumped at the sharpest pace since August of 2021.

Continuing the trend of an upbeat job market in the UK, the employment in the manufacturing sector of the UK surged for the 12th consecutive month in December, effectively the whole 2021 contributed towards employment growth. Though the rate of jobs growth remained near the three-month high figure realised in November of 2021.

Despite the partial subduedness in the market due to the unfavourable business conditions on the back of Covid activity, the majority of manufacturing corporations have maintained a positive outlook in the terminal phase of 2021. Approximately 63% of the enterprises are anticipating the production levels to increase in the upcoming 12-month stretch, while a meagre 6% have projected a contraction in the present calendar year.

As the companies increasingly passed on the pressure of higher input prices to the consumers, the rate of increases in the factory-gate prices jumped to a new series-record high in December of 2021.

The inflationary hurdles are expected to subside by the end of H1 2022, as a consequence of which the upcoming policy actions by the Bank of England, alongside the commentary by the Federal Open Market Committee of the US Federal Reserve will be keenly watched by the corporations, as well as the investors.

The companies have also remained optimistic, as far as the pre-decided investment is concerned and the apparent hopes of less disruption due to Covid-19 pandemic (SARS-CoV-2) virus, the cumulative aftereffects of Brexit, supply chain troubles and other operative challenges.

News

UK’s housing sector and the impediments that need to be tackled in 2022

Written by Mr. Kunal Sawhney, CEO, Kalkine Media

The UK’s housing sector has witnessed a boom in 2021 as behavioural changes in home buying led to a ‘race for space’ amidst the pandemic. The latest data by building society Nationwide revealed that UK house price annual growth rate surged to 10.4 per cent in December this year, the fastest pace in about 15 years. At the same time, the average UK house prices in December touched record highs, at £254,822.

The pandemic related lockdowns and restrictions led to a marked shift in homebuying behaviour, while the historic low-interest rates and stamp duty cuts have been the major growth factor for the housing boom.

However, the scenario may not remain the same in the years to come. As per the latest forecast, the sector is expected to witness a slowdown going into 2022 after the stamp duty cuts ended in September and the central bank went for a rate hike despite Omicron fear.

What could happen in 2022?

The growth scenario may witness a change to the downside, but the sector is expected to continue seeing high demand amid historic levels of low stock going into 2022.

The demand for rural properties and open spaces is sticky, with buyers opting for the house with a completion date as late as May 2020. Thus, indicating this is going to remain persistent well into the new year.

High hopes from the industry

Given that demand is sticky, especially in the sub 2 million brackets, housebuilders are expected to focus more on new developments in this range.

Additionally, there had been a rise in demand for inner-city homes due to the increase in and flexibility of remote working.  This trend indicates it could be a geo-economic shift rather than a previously expected post-pandemic related behavioural change.

Obstacles and the need for government support

The lack of building materials due to ongoing supply chain-related disruptions and challenges is a major factor impeding the supply of stock in the housing sector.

If the government comes forward and offers grants and schemes to help businesses in the sector when they are required to place advance stock orders for materials, it could be a big help for the industry.

Streamlining construction applications is another major area where the government can chip in since it is one of the major impediments that has caused significant delays. Apart from that government’s focus on social housing is another area that can support the sector.

 Lack of staff shortages has been another major factor for the industry. One way to help address this challenge is by offering skill training, providing access to non-UK based workers, which can also help address wage inflation challenges and more.

Another area that can help in addressing staff shortages is continuing the hiring of more apprentices.

Overall, while there is some uncertainty as to how well the sector can perform in 2022, the government, industry and other stakeholders can work collectively to help the housing sector sustain its growth.

News

Omicron consequences UK businesses may face in 2022

The number of consequences of the Omicron variant transpired so far have certainly increased the apprehensiveness amidst a slew of small-to-large scale businesses, as well as institutional investors across the world as the new strain continues to quash the immunity obtained from the double-jabbed Covid-19 vaccination programme. The newly emerged mutation of Covid-19 (SARS-CoV-2) repealing the so-called maximum protection has severely deteriorated the marginal confidence.

Businesses across the world that were not able to resume their operations at the maximum possible scale were eventually looking forward to the next year, 2022, taking a fresh start with adequate staff size and minimal operative hurdles, the move that can accelerate them beyond the pre-Covid level of revenues.

The fresh unrest in the markets, including the cross border trade and disturbed international movement due to heightened border control measures, alongside the mini lockdowns and increased level of pandemic-induced restrictions have furthered the difficulties for enterprises operating in various industries.

Given the increased volatility and uncertainty with regard to the evolving nature of Omicron variant, higher transmissibility and ability to supersede the vaccine-acquired protection, the upcoming course of few quarters is likely to remain patchy for most of the industries, unless the healthcare authorities, along with the prospective vaccine makers and pharmaceutical corporations manage to formulate a meaningful response that can essentially bring down the rate of infections, as well as the vulnerability of people against the fresh strain.

Here are some of the potential consequences of the Omicron variant that can hurt businesses in 2022:

 

Reintroduction of lockdowns

Several countries are continuously examining the evolving course of Omicron variant, the daily rate of infections and the people seeking immediate medical intervention.

Following the sharp increases in the cases associated to the Omicron and previously existing Delta variant, the rate of hospital admissions has also seen a steep rise, effectively burdening the healthcare settings and limited resources to reprioritise the work of already deployed manpower to Covid care patients.

Earlier last month itself, the Austrian government reintroduced the fourth national lockdown after the country reported consequential increases in the cases linked to the Delta variant.

The recent lockdown announcement by the Netherlands government has escalated the jitters as investors and businesses are fearing a similar precautionary action to be taken by other European nations with a focus on the United Kingdom as it crossed 30,000 Omicron infections on Sunday, 19 December.

Nation-wide lockdowns materially restrict the commercial activity in the region, delaying the time of recovery as a large section of businesses still grapple with broken balance sheets and minimal earnings due to curtailed operations for most part of the pandemic era so far.

 

Reciprocatory restrictions

As a bunch of countries look forward to imposing country-wide shutdowns, some economies are contemplating the course of pandemic to reintroduce a set of pandemic-induced restrictions that can essentially help in bringing down the rate of infections.

Not only these curbs, the governments are gradually increasing the border control measures. Following the continuous rise in the cases, the administrations will be left with no option other than to completely restrict the non-essential international travel. A slew of hospitality settings, indoor, as well as outdoor are poised to be affected in the near term as lockdown guidelines will certainly disrupt the operations, as some governments may order such enterprises to completely shut their functions for a certain period of time.

The lockdown restrictions have done no good to any business, barring several sectors including real estate and essential retail. No matter how limited is the scope of restrictions, the overall business environment is likely to be affected in a broader way, effectively paving the way for elongated extended pessimism amidst the market participants.

In order to bolster the precautionary steps taken by the devolved administrations, the Downing Street administration has doubled funding set aside to tackle Covid challenges in the respective geographies. According to the fresh updates, the administrations can spend an additional £860 million to take necessary steps that are required to keep people safe.

News

Markets to be affected in short-to-medium term as Omicron cases intensify

Written by Mr. Kunal Sawhney, CEO, Kalkine Media

The sharp jump in the number of infections associated with the Omicron variant has materially increased the apprehensiveness of market participants as the government of the United Kingdom is expected to reintroduce some pandemic measures to contain the spread of virus in a matter of few weeks.

Given the high rate of infection across the widespread geography of the UK, the healthcare authorities have turned cautious as a large number of double-jabbed individuals are returning positive with the Omicron variant. On Sunday itself, the UK registered a 65% rise in the cases linked to the new variant with the total count of infections mounting over 3,000. As of 12 December 2021, the total number of Omicron infections stood at 3,137 following a rise of 1,239 confirmed cases on Sunday. Of the total, 2,953 cases have been confirmed in England with a single-day increase of 1,196 cases.

According to the latest estimates by the UK Health Security Agency (UKHSA), the Omicron variant has been spreading at a rapid pace across England with the country reporting a sharp surge in confirmed cases. As far as the transmissibility of variants is concerned, the new variant has been spreading more effectively as compared to the previously existing Delta variant.

Markets have experienced a lacklustre trade in the fourth consecutive session on Monday, 13 December as investors continue to contemplate the extent of damage due to the emergence of cases. According to the UKHSA, the Omicron variant will become the dominant variant in the upcoming days, accounting for over 50% of the total Covid infections in the country by the middle of December if it continues to multiply at the current rate.

High rate of infection is highly likely to increase the burden on the National Health Service (NHS) as the rate of hospital admissions will also soar as a proportion of patients remain vulnerable to such virus-induced infections.

Shockingly, the UK is set to surpass one million infections linked to the Omicron variant by the end of present month, if the prevailing rate of infection continues without any major correction.

Such a resurgence of cases in a country that started the Covid-19 vaccination drive, at a time when most of the businesses are looking forward to recognising a substantial increase in the earnings can severely disrupt the path of economic recovery as the services sector, mainly the enterprises operating within the hospitality industry are yet to see a meaningful rise in the revenues.

The government of the UK has already tightened the restrictions at various settings that are likely to host large gatherings. A large section of people who have made bookings around the Christmas season and the subsequent year-ender holidays have already cancelled the upcoming arrangements, reigniting the jittery amidst the businessowners. A number of enterprises have downsized their expectations from the festive season as anticipated earlier.

Most of the commercial settings were expecting to witness a sharp bounce back during the festivities, a period that can accelerate them on the so-called path of recovery. The adversities associated with the Omicron variant have once again renewed the tensions as European nations were already struggling with the Delta variant.

Any potential disruption in the business operations is likely to erase the cumulative recovery realised so far in the present calendar year. As far as the markets are concerned, the domestic benchmark index FTSE 100 was adequately poised to register fresh multi-month highs until the third week of November. The situation has categorically upended with the focus shifting on the upcoming developments with regard to the spread of Omicron variant, the fatalities linked to it and the rate of hospitalisation.