Growth slows on Brexit uncertainty
Key sectors to show economy is grinding to a halt
BRITAIN’S growth is slowing, closely watched economic indicators are expected to show this week.
Economists believe that the Markit / chartered institute of procurement and supply purchasing managers indices for the manufacturing, construction and services sectors, will show that the economy is treading water because of a combination of consumers reining in their spending and businesses tightening their purse strings.
Tomorrow the PMI manufacturing score is expected to come in at 51.5 for November, compared to 51.1 last month. Any score above 50 indicates growth, but the manufacturing score has been falling for a year.
The following day, the construction score is expected to fall from 53.2 to 52.6, while on Wednesday, the PMI reading for Britain’s powerhouse services sector is expected to rise by 0.3 points to 52.5.
Howard Archer, chief economic adviser to the EY ITEM Club think tank, which uses the Treasury’s models to make its forecasts, said that given the weak PMI data, fourth-quarter gross domestic product (GDP) is likely to come in weaker than the 0.6 per cent it registered for the preceding three-month period.
He said: “Third-quarter growth was helped by the heatwave this summer, but a lot of the activity took place early on. However, recent survey data indicates that growth has slowed. We have GDP for the fourth quarter down to 0.3 per cent.
“We think that consumers are limited in what they can spend, despite pay growth picking up. Also, the uncertainty surrounding Brexit has made businesses cautious.”
Investec chief economist Philip Shaw said: “We suspect that the economy has slowed during the fourth quarter. We had punchy growth during Q3, but it looks to have declined modestly since. The PMI surveys will give us a clue as to the scale of the deceleration. It may well be down to Brexit fears and restraint on corporate spending.”
Colin Ellis, chief credit officer for Europe, the Middle East and Africa at global credit ratings agency Moody’s said although UK GDP growth was comparatively strong in the third quarter, declining PMI survey indicators suggest that sentiment and confidence in the economy is worsening. He added that business investment is weak and has been consistently falling this year.
Elsewhere, research from business funding group Capital Step has found that 62 per cent of Britons believe the Government does not provide as much support to regional and family-run businesses, as it does to large multinationals. It found that a similar number believes the UK high street is suffering as a result of small and family-owned businesses not receiving adequate support from local councils and the Government.
Jonathan Schneider, executive chairman and co-founder of Capital Step, said: “Familyrun and regional businesses form the lifeblood of the UK’s entrepreneurial landscape, and to see so many believe that the Government is not looking after this vital sector of the UK’s business community is concerning.”