UK services activity drops less than feared in second lockdown - PMI

LONDON (Reuters) - Activity in Britain's services sector fell less than expected in November, as a four-week partial lockdown in England had a smaller impact on firms than measures earlier in the year, and businesses grew more optimistic about the outlook for 2021.

The IHS Markit/CIPS UK services Purchasing Managers' Index of business activity (PMI) fell to 47.6 in November from 51.4 in October.

This was the first time since June that it fell below the 50 level that divides growth from contraction, but a smaller drop than the decline to 45.8 in an earlier 'flash' estimate or the record-low reading of 13.4 in April.

The composite PMI, which includes manufacturers who enjoyed stronger growth, dropped to 49.0 from 52.1, also the lowest since June but a smaller drop than an initial estimate of 47.4.

"New lockdown measures and tighter pandemic restrictions unsurprisingly tipped UK private sector output back into decline. However, the collateral damage on sectors outside of hospitality, leisure and travel has been far more modest than in the first lockdown period," IHS Markit economist Tim Moore said.

Britain's economy suffered a record 25% fall in output during the first lockdown in March and April, but the Bank of England forecast this month that output would fall just 2% in the final three months of 2020.

While some sectors such as retail - which is not covered by the PMI - and hospitality have been hard hit by the second lockdown, others have found it easier to adapt, IHS Markit said.

News of effective COVID-19 vaccines this month has also boosted business optimism in the services PMI, which rose to its strongest since February's five-year high.

Job losses continued for a ninth consecutive month, however, the longest continuous run since 2010, and unemployment is forecast to rise further during the months it will take to roll out the vaccine to millions of Britons.

November's survey took place from Nov. 12-26, after initial reports of the success of the Pfizer-BioNTech vaccine against COVID. The 'flash' data published on Nov. 23 was based on responses collected up to Nov. 19, before news of AstraZeneca and the University of Oxford's successful vaccine trials.

The improvement in the survey between the flash and the final data was concentrated in the business activity index, with little change in the expectations component.

(Reporting by David Milliken; Editing by Hugh Lawson)