What's going on?
‘Ello ‘ello ello, what’s this then: new data out on Monday showed the UK services sector – what covers everyone from chimney sweeps to telecoms execs – did better than expected in December.
What does this mean?
Before the UK general election last month, investors had been expecting to see the country’s services sector shrink in December. But cor blimey guvnor, new data only went and showed the sector holding steady, it did.
That could be down to the decisive outcome of the election, which called time on the political deadlock and, in turn, the uncertainty that’s knackered the country since 2016’s Brexit referendum. With the UK finally set to leave the European Union at the end of January, optimism among businesses is rising: some even expect a short-term boost in demand once the departure’s underway. But they might not want to be too chuffed with themselves: the UK’s manufacturing sector is in such Barney Rubble that the private sector still shrank overall.
Why should I care?
For markets: Investors love dosh, they do.
Data for the eurozone’s private sector was revised upwards on Monday, showing it’s grown at its fastest pace since August. Things were particularly promising in Germany, where retail sales grew a whopping 2% between October and November. That’s double what investors expected, which might be why they bought up the euro on Monday.
Zooming out: Firms hate being skint, they do.
More Brexit clarity stands to benefit countries stepping in time with the UK, too. A new study showed foreign firms that are exposed to the uncertainty have lost market value, and reduced their hiring and investment as a result. Irish firms – which have cut investment by an average of 4% every year since 2016 – are especially vulnerable. A clearer idea of what’s next should help businesses plan ahead, but they’ll still have to deal with the potential consequences: many businesses reckon regulatory and operational changes will cause their own problems.