Business Confidence Up, Is It A Reason To Cheer?

Business Confidence Up, Is It A Reason To Cheer?

Summary

  • Business confidence in the UK improves by 3 percent - in Lloyds Bank survey
  • Construction, manufacturing and retail show improvement, while hospitality and education continue to suffer
  • Supply chain disruptions cited as the biggest reason still holding back recovery

The British economy has shown tenacity, as it springs back to life after the country gradually opened up following the seven-week lockdown imposed during March this year. The latest Lloyds Bank Business Barometer survey conducted between 1st and 15th of June 2020 has revealed that business confidence among British businesses has jumped three percentage points during the period. It is the highest jump witnessed this year since January. At the same time, it needs to be noted that the business confidence remained at minus 30, which is still worrisome. It is to be noted that at the beginning of this year, several economic indicators had witnessed an improvement as the country parted ways with the European Union and entered a new era which promised new growth and employment opportunities. That momentum, however, could not continue as the pandemic slowly started to take the world in its grip, and more and more businesses were forced to put down their shutters.

The coronavirus pandemic and the ensuing lockdown affected different businesses differently. Pharmaceuticals and essential goods services suffered a very little downturn during the period. Online businesses which delivered essential goods to people were the ones who actually witnessed a growth during the lockdown. These businesses became saviours for millions of people who were stuck in their houses because of the lockdown and had no other means to replenish themselves. The manufacturing and construction industries faced a greater level of risk, as the business activity in these industries had come a virtual standstill and the businesses operating in those sectors ranged from small to very large. While the banking sector, software sector and several IT-enabled businesses were able to function partially because of the work from home facility extended to them by their employers, the manufacturing sector had virtually shut down, because it mandates going to the factories to deliver a tangible output. Gradually, a lot of factories started their production lines, even with less staff and strict social distancing measures in place, and started fulfilling their delivery commitments even though new orders were a little hard to come by. The retailing sector also got a big boost after the opening of the lockdown, as the restriction on trading and movement of non-essential goods was relaxed, and the volume of goods being handled by online retailing firms increased exponentially. The logistics companies who handle these goods have also witnessed growth during this period, and several of them have earmarked investments worth millions of pounds to increase warehouse capacity, purchase more vehicles and hire more employees.

Despite a resurgence in many industries, there are several others where an uptake up business activity is yet to take place. Shop floor retail, restaurants, hotels, bars, resorts, recreational establishments, and airlines which are predominantly consumer-facing businesses, have a greater risk of transmitting the virus from one person to another, and hence face greater challenges in reopening. These businesses will, however, be thrown open from 4th July onwards when the third and final phase of the re-opening of the economy comes into effect.

The measures taken up by the government to protect businesses and livelihoods in the country, even before the lockdown was imposed, had a good impact and is a critical reason behind the visible resurgence. The government had rolled out three main schemes, in the month of March, among a host of other measures that were highly instrumental in holding the economy together. The first was the Furloughing Scheme whereby the government undertook to pay 80 per cent of the salaries of staff up to a maximum of £2,500 per person every month. Then there was the Coronavirus Business Interruption Loan Scheme whereby the government guaranteed loans of businesses who availed of them to pay employee salary and other essential business expenses during the lockdown period. Finally, the Bounce Back Loan Scheme where businesses could directly apply for loans online, and the government undertook to give them that money on an urgent basis on lucid terms. These schemes were highly effective in businesses being able to retain most of their staff and having enough working capital at their hand to restart their businesses. The cost of these schemes to the exchequer, though was very high, but they protected the country from a far greater economic loss, had so many of businesses got failed, leaving millions of people unemployed.  

Lloyds Banking Group Plc

Lloyds Banking Group Plc (LON: LLOY) is a British banking and financial services company with operations in the United Kingdom, Europe, United States of America, Asia, as well as the Middle East. Other than commercial lending, the bank’s offerings include retail banking, mortgage, commercial and life insurance, pensions, and wealth management.

Though the company is registered in Edinburgh in Scotland, it has its headquartered in London. The bank's shares are listed for trading both at the London Stock exchange and the New York Stock Exchange. At the London Stock Exchange, they trade with the ticker name LLOY, and at the New York Stock Exchange, they trade with the ticker name LYG. The company's shares also form part of the FTSE 100 index at the London Stock Exchange.

Conclusion

Though the lockdown will be completely withdrawn by July 4, there are two major factors that could be the biggest impediments for an early economic recovery. The first is disrupted supply lines, which are deeply affecting both manufacturing and retail sectors. The government has indicated that these measures will continue to be in place despite the complete opening of the lockdown, along with other measures that would be deemed necessary to check the spread of the virus. The second important factor, of course, is the pandemic itself. The health authorities in the country are still a long way to go before they are able to put a cap on the spread of the virus, which has so far infected as many as 312,000 people and claimed the lives of 43,500.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?

Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.

We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.

To know more about these dividend stocks, click here

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK