LONDON's private sector grew at a fast clip in February, survey data has shown, even as the coronavirus outbreak took a toll on tourism.

The Natwest/IHS Markit London purchasing managers' index came in at 56 in February, down slightly from 56.5 in January but above the longrun average. A score of above 50 indicates 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 soon 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 supply chain pressures and led to rising input costs.

Stuart Johnstone, managing director of London and south-east banking at lender 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 added.

A separate survey showed that optimism across businesses in the UK jumped by the biggest amount in a decade in February, but also came with a warning about coronavirus.

Accountant BDO's optimism index has now jumped 5.8 points to 101.6 — 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".

The surveys came just days ahead of new chancellor Rishi Sunak's Budget on Wednesday.

It has long been trailed as the end of austerity and the start of a new approach to spending that will "level up" the country, but is now likely to be focused on dealing with the fallout from coronavirus.

Crossthwaite said the next month will be "crucial" for the UK economy and levels of optimism among businesses, which could be "brought back down to earth by the impact of the coronavirus".

(c) 2020 City A.M., source Newspaper