In January, businesses estimated that their sales in 2021 Q4 would be 6% lower than they otherwise would have been because of Covid-19, with investment 11% lower and employment 3% lower.
In the latest survey, businesses’ near-term expectations for the impact of Covid on sales, employment and investment improved following a deterioration of expectations in the previous month. This may have been due to the impact of the Omicron variant being less severe than first anticipated. The impact of Covid on sales was expected to be less severe, at -6% in both 2021 Q4 and 2022 Q1, compared with -7% in both quarters in the December survey. Businesses anticipated this impact on sales to ease to -3% in 2022 Q2, up from -4% in December. In January the expected impact of Covid-19 on medium-term sales, for 2023 and beyond, also rose to 1%, from around -1% in December.
In January, businesses’ expectations for the impact of Covid on investment in 2021 Q4 remained stable at -11%, although this was anticipated to ease to -7% in 2022 Q1, up from -10% in the December survey. Investment in 2022 Q2 was expected to be around 3% lower than in the absence of Covid, compared with -5% in the December survey. The drag on investment was expected to reverse in the medium-term, with investment anticipated to be 4% higher than in the absence of Covid in 2023 and beyond, a marked improvement from -1% reported in December.
Firms also reported improving expectations for the impact of Covid on employment. Businesses expected employment to be 3% lower due to Covid in both 2021 Q4 and 2022 Q1, up from -5% and -4% respectively in the December survey. In January, firms anticipated the impact of Covid on employment to reach -2% in 2022 Q2, compared to -3% reported in the December survey. In January the expected impact of Covid-19 on medium-term employment, for 2023 and beyond, also improved by 1 percentage point to -1%.
The share of workers who were unable to work (due to factors including sickness, self-isolation, and childcare) also rose in January to 6%, up from 4% in December. This was the highest reported rate of staff absence since the start of the pandemic. The proportion of hours worked from home remained stable in January at 30%, as government guidance for workers across the UK to work remotely where possible remained in place for most of the survey window.
In January, 84% of firms reported they were finding it harder to recruit new employees compared to normal, with 55% reporting it to be much harder, down from 63% in the previous month. The percentage of non-labour inputs being disrupted fell slightly to 14% in January, from 15% in December. The proportion of firms suffering some form of disruption to their non-labour inputs remained stable at around two-thirds.
Annual output price inflation continued to increase in the DMP, reaching 5.1% on average in the three months to January, up by 0.1 percentage point on December. Year-ahead annual output price inflation was expected to remain stable at 4.5% in the three months to January 2023.
The DMP was set up in August 2016 by the Bank of England together with academics from Stanford University and the University of Nottingham. It was designed to be representative of the population of UK businesses. All results are weighted. See Bloom et al (2017) for more details.
The DMP receives funding from the Economic and Social Research Council.