Coronavirus resurgence 'put brakes on' economic recovery

The resurgence of the coronavirus pandemic last month “put the brakes on” the UK’s economic recovery, according to a chief economist.

Analysis by the Royal Bank of Scotland found that while business activity in Scotland increased in December, the rise was the weakest since growth returned ten months ago.

The bank’s latest business activity index also indicated Scottish firms also increased their charges as a result of greater fuel, transport, staff and material costs, along with shortages, Brexit and Covid-19.

Malcom Buchanan, chair of the Scotland Board at the Royal Bank of Scotland, explained that Scottish firms expected coronavirus related issues to subside going into 2022.

“Scotland’s private sector grew at the weakest rate for ten months as Omicron concerns weighed on client demand and supply issues continued to hinder companies, particularly in the manufacturing sector,” he said.

“Inflationary pressures also remained severe in December, although the latest data pointed to a slight easing of pressure as both cost burdens and average charges increased at slightly reduced rates.

“Nonetheless, firms remained upbeat towards activity over the next 12 months, with Scottish companies expecting Covid-19 related issues to subside and demand to improve as we enter 2022.”

Sebastian Burnside, the bank’s chief economist, suggested business activity levels have been more resilient due partly to lighter restrictions being in place.

“The resurgence of the pandemic in December put the brakes on the UK’s economic recovery, with each nation and region feeling the effects as people changed their behaviour in response to rising cases,” he said.

“But despite the similarities to previous waves business activity levels seem to have been more resilient this time, due in part to comparatively lighter restrictions.”