British manufacturers see little evidence of a ‘V’-shaped recovery from the corona virus pandemic underway and many are planning to slash investment, a business survey showed on Monday. The Make UK industry association and accountants BDO said output and orders had improved from historic lows struck last quarter during the depths of the pandemic.

But the survey’s quarterly gauge of investment intentions fell to -32% from -26%, almost touching depths last seen in the financial crisis. “Manufacturing has begun to climb away from the abyss that it stared into earlier in the year,” said Stephen Phipson, chief executive at Make UK.

Phipson said, “But, make no mistake it is going to be a long haul back towards normal trading conditions, with talk of a ‘V’-shaped recovery nothing more than fanciful.”  The possibility that Britain and the European Union fail to agree on a trade deal before the end of the Brexit transition period would be pressure for many manufacturers.

Output in Britain’s manufacturing sector was still 8.7% below its pre-pandemic level in July, according to official data published earlier this month. Like other indicators of the labour market, manufacturers’ employment expectations deteriorated in the latest Make UK/BDO survey its gauge of future output improved somewhat. The survey of 364 companies was conducted between Aug. 5 and Aug. 26.

UK Finance Minister Rishi Sunak is again stepping forward to help businesses. The news, cited by the Financial Times (FT), indicates an extension of four loan schemes for applications until the end of November.

On the other hand, the US dollar index (DXY) drops as markets await fresh clues to extend the latest greenback recovery amid mixed signals from virus, stimulus, and a tussle with China. Adding to the greenback’s problem is its latest tussle with Iran and an on-going tension with Beijing.

GBP/USD 4 Hour Chart:

Support: 1.2891 (S1), 1.2860 (S2), 1.2806 (S3).

Resistance: 1.2977 (R1), 1.3031 (R2), 1.3062 (R3).

Even though there is little sign of V-shaped recovery in UK as per Make UK/BDO survey, pound is strong against broad US dollar weakness.  Looking forward, a light calendar may keep traders directed to the risk catalysts, and hence speech from the UK’s health authorities, at 10:00 AM GMT will be the key to watch. We expect a bullish trend for GBP/USD.