London’s private sector grew strongly in February, survey data has shown, even as the coronavirus outbreak took its toll on tourism.
The Natwest/IHS Markit London purchasing managers’ index posted 56 in February, down slightly from 56.5 in January but stronger than the long-run average. A score of above 50 indicates that the private sector expanded.
It is the latest evidence of an economic bounce in the capital since the December General Election, which provided some certainty to firms after three years of wrangling over Brexit.
Business confidence strengthened to a four-year high in February, with some companies noting a post-Brexit surge in activity and investment.
However, there were signs in the survey that the coronavirus outbreak could dent London’s economy.
Respondents reported that tourism was much lower compared to the start of the year while sales were also down. Meanwhile, disruption in China caused heightened supply chain pressures and led to rising input costs.
Stuart Johnstone, managing director of London and south east banking at Natwest, said: “Should disruption continue into the summer, the capital could see a greater impact on tourism which many businesses rely upon for sales.”
“Forecasts of future growth should be treated with caution until we know the full effect of the outbreak on UK business,” Johnstone said.
A separate survey showed that optimism across businesses in the UK jumped by the biggest amount in a decade in February, but warned that coronavirus could reverse the gains.
The optimism index from accountants BDO jumped 5.8 points to 101.6 last month, rising above the historical average.
BDO partner Kaley Crossthwaite said a post-election bounce was in large part responsible. Yet she said that “businesses will now be spending the coming weeks focused on mitigating the uncertainty caused by coronavirus”.