David Milliken

LONDON, (Reuters) – British businesses are beginning to notice the effects of Omicron coronavirus, along with further pressure on staffing and prices, a poll showed Tuesday.

Lloyds Bank (LON) said that its monthly confidence survey on business, which was conducted between Nov. 26-Dec. 10, was at 40%. This is well above the long-term average of 28%.

Respondents began to decline in the second week, as the Omicron variant’s impact became more apparent. Sentiment fell back to 32% the same way it did during spring and summer.

IHS Markit’s purchasing managers data last week showed that activity growth was at a 10-month low.

Hann-Ju Ho from Lloyds Bank Commercial Banking, said that while businesses face a variety of headwinds as well as challenging trading conditions (including higher interest rates) in the coming years, many are resilient and optimistic that there will be no severe downside risks.

While Omicron caused a slight slowdown in growth last week, the Bank of England raised its key interest rate by 0.1% to 0.25%. Its chief economist indicated that additional rate hikes are possible if there is no improvement in price pressures.

According to Lloyds Survey, 45% of companies expect to increase prices in December, compared with 44% in November. This is because wage pressures, a concern in particular for the BoE, have increased.

Lloyds reported that pay expectations are continuing to grow. They have reached new heights of 48% for businesses expecting average growth in their wages of 2% and 33%, respectively. The bank said that 14% expected their businesses to increase pay by at minimum 4%.

These expectations match those in other surveys.