UK flatlines as services falter
BRITAIN has stalled and could even slip into reverse after the worst performance by the dominant services sector since just after the Brexit vote in 2016.
Uncertainty about the terms of departure from the European Union weighed heavily on a sector which generates more than three quarters of the country’s output.
A snapshot of activity across retail, pubs and restaurants, transport, communications and finance showed the economy barely grew in November.
Apart from a slump following the Referendum, last month was the worst performance by the combined services, manufacturing and construction sectors since February 2013.
The IHS Markit/CIPS Services Purchasing Managers’ Index fell from 52.2 in October to 50.4 – just above the 50-point mark denoting expansion, with firms saying “heightened Brexit uncertainty” is responsible for clients putting off investment decisions.
Rising salaries and weaker demand growth contributed to companies becoming more cautious about hiring, with a number highlighting difficulties recruiting suitably skilled staff.
Optimisim is at a 28-month low. IHS Markit chief business economist Chris Williamson described the economy as “flatlining”, with surveys pointing to Gross Domestic Product growth of just 0.1 per cent in the fourth quarter compared with 0.6 per cent in the previous three months.
He added: “A contraction of servicesector business activity in November was only avoided by firms working through back orders to an extent not exceeded since 2009.
“As such, unless demand revives, a slide into economic decline at the turn of the year is a distinct possibility.
“Uncertainty in relation to the [EU] withdrawal agreement and the possibility of no deal was often reported to have caused companies and customers to cancel or postpone spending and investment decisions.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The further decline in services in November to its lowest level since the panic after the Referendum provides the clearest indication yet that Brexit uncertainty is draining momentum. While a small fall in GDP isn’t likely, no one should rule it out.”