Britain’s economy bounced back in February, with private sector activity at its strongest in eight months after consumer spending on travel, leisure and entertainment roared back to life as the threat posed by the Omicron variant of the coronavirus eased off.
The IHS Markit/CIPS composite Purchasing Managers' Index rose to 60.2 in February from 54.2 in January, its highest level since June 2021 eight months. However, the resurgence was accompanied by intensifying inflation pressure, with costs rising at the second-fastest pace on record.
“With the PMI’s gauge of output growth accelerating markedly in February and cost pressures intensifying to the second highest on record, the odds of an increasingly aggressive policy tightening have shortened, with a third back-to-back rate rise looking increasingly inevitable in March,” said Chris Williamson, chief business economist at Markit.
Traders are pricing in a 25 basis-point interest-rate increase when the Bank of England meets in March, with the strong possibility of a 50 basis-point rise, a move unheard of since the central bank gained independence in 1997.
With headline inflation at a 30-year high of 5.5 per cent in January and expected to peak at 7.25 per cent in April, according to the BoE, more than triple the bank’s target, policymakers are expected to deliver a series of rate rises this year that will drive up benchmark borrowing costs to about 2 per cent by the end of 2021.
The move comes as British households face a cost-of-living crunch amid rising energy prices and higher tax.
Britain's economy had just returned to its pre-pandemic size before it was hit by the Omicron variant in December.
As a result, the PMI index sank to a 10-month low of 53.6 in December when Britons were advised to work from home due to Omicron and many chose to cut back on socialising in the run-up to Christmas.
February's rise was driven by an increase in the flash services PMI to 60.8, from 54.1 in January, while the manufacturing PMI was unchanged at 57.3.
“Private sector companies reported another steep increase in incoming new work in February,” IHS Markit said.
“Stronger client demand was widely linked to improving confidence about the UK economic outlook and roll back of pandemic restrictions.”
Monday's PMI data also showed the composite input cost index rose to 81.8 from 80.2 — the second highest reading on record after November's 83.2. Higher wages, energy bills and raw material costs all contributed to rising operating expenses.
Hiring rose at the fastest rate since October, with tightness in the employment market — where there is a record number of job vacancies — one of the main reasons why the BoE fears that high inflation could be slow to dissipate.
The eurozone economic recovery also rebounded sharply this month as an easing of coronavirus restrictions gave a boost to the bloc's dominant service industry, a survey showed. However, consumers faced prices rising at a record rate.
As the Omicron coronavirus variant swept across Europe, some governments reimposed measures to contain its spread. With large parts of the population now vaccinated, many of those measures have been eased.
IHS Markit's Flash Composite Purchasing Managers' Index, considered to be a guide to overall economic health, jumped to a five-month high of 55.8 in February, from 52.3 in January, with the PMI for the service industry rising to 55.8, from 51.1, a five-month high.
“The eurozone economy regained momentum in February as an easing of virus-fighting restrictions led to renewed demand for many consumer services such as travel, tourism and recreation, and helped alleviate supply bottlenecks,” said Chris Williamson, chief business economist at IHS Markit.
Richard Amaro, senior economist at Oxford Economics, said the February surge was driven by much faster growth in services and very solid trends in manufacturing, despite some slight easing in the pace of growth in February.
“The forward-looking indicators were also encouraging as year-ahead sentiment rose in February to its strongest since June 2021,” said Mr Amaro.
“The weak start to the year means that eurozone GDP growth is likely to remain modest in Q1 [the first quarter], but today’s PMI results chime with our forecast that solid growth will resume in Q2.”
Andrew Kenningham, chief Europe economist at Capital Economics, also expects the eurozone economy to expand at a reasonable pace in the first quarter and accelerate in the next two quarters as tourism, travel and hospitality continue to normalise.
“But inflationary pressures will stay very strong for many months yet,” he said.
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
Reading List
Practitioners of mindful eating recommend the following books to get you started:
Savor: Mindful Eating, Mindful Life by Thich Nhat Hanh and Dr Lilian Cheung
How to Eat by Thich Nhat Hanh
The Mindful Diet by Dr Ruth Wolever
Mindful Eating by Dr Jan Bays
How to Raise a Mindful Eaterby Maryann Jacobsen
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
Desert Warrior
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
Director: Rupert Wyatt
Rating: 3/5
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
MATCH INFO
World Cup qualifier
Thailand 2 (Dangda 26', Panya 51')
UAE 1 (Mabkhout 45 2')
Dunki
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Explainer: Tanween Design Programme
Non-profit arts studio Tashkeel launched this annual initiative with the intention of supporting budding designers in the UAE. This year, three talents were chosen from hundreds of applicants to be a part of the sixth creative development programme. These are architect Abdulla Al Mulla, interior designer Lana El Samman and graphic designer Yara Habib.
The trio have been guided by experts from the industry over the course of nine months, as they developed their own products that merge their unique styles with traditional elements of Emirati design. This includes laboratory sessions, experimental and collaborative practice, investigation of new business models and evaluation.
It is led by British contemporary design project specialist Helen Voce and mentor Kevin Badni, and offers participants access to experts from across the world, including the likes of UK designer Gareth Neal and multidisciplinary designer and entrepreneur, Sheikh Salem Al Qassimi.
The final pieces are being revealed in a worldwide limited-edition release on the first day of Downtown Designs at Dubai Design Week 2019. Tashkeel will be at stand E31 at the exhibition.
Lisa Ball-Lechgar, deputy director of Tashkeel, said: “The diversity and calibre of the applicants this year … is reflective of the dynamic change that the UAE art and design industry is witnessing, with young creators resolute in making their bold design ideas a reality.”
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SUE%20GRAY'S%20FINDINGS
%3Cp%3E%22Whatever%20the%20initial%20intent%2C%20what%20took%20place%20at%20many%20of%20these%20gatherings%20and%20the%3Cbr%3Eway%20in%20which%20they%20developed%20was%20not%20in%20line%20with%20Covid%20guidance%20at%20the%20time.%3C%2Fp%3E%0A%3Cp%3E%22Many%20of%20these%20events%20should%20not%20have%20been%20allowed%20to%20happen.%20It%20is%20also%20the%20case%20that%20some%20of%20the%3Cbr%3Emore%20junior%20civil%20servants%20believed%20that%20their%20involvement%20in%20some%20of%20these%20events%20was%20permitted%20given%20the%20attendance%20of%20senior%20leaders.%C2%A0%3C%2Fp%3E%0A%3Cp%3E%22The%20senior%20leadership%20at%20the%20centre%2C%20both%20political%20and%20official%2C%20must%20bear%20responsibility%20for%20this%20culture.%C2%A0%3C%2Fp%3E%0A%3Cp%3E%22I%20found%20that%20some%20staff%20had%20witnessed%20or%20been%20subjected%20to%20behaviours%20at%20work%20which%20they%20had%20felt%20concerned%20about%20but%20at%20times%20felt%20unable%20to%20raise%20properly.%3C%2Fp%3E%0A%3Cp%3E%22I%20was%20made%20aware%20of%20multiple%20examples%20of%20a%20lack%20of%20respect%20and%20poor%20treatment%20of%20security%20and%20cleaning%20staff.%20This%20was%20unacceptable.%22%C2%A0%3C%2Fp%3E%0A
