Weak service sector stokes growth fears

Fears that the UK economy’s anaemic growth could fizzle out altogether intensified yesterday after the dominant services sector contracted for the first time since 2016’s Brexit vote.

The closely watched IHS Markit/cips purchasing managers’ index (PMI) for the sector tumbled to 48.9 in March from 51.3 in February, weaker than economists’ forecasts and putting it below the 50 mark that separates growth from contraction.

It is the first time the index hasbeenincontractionaryterritory since July 2016, immediately after the UK voted to leave the European Union.

Aside from that month, the reading was the joint weakest over the past decade, equalling the previous low point recorded in December 2012.

Services makes up about three-quarters of the economy though the PMI snapshot does not include the retail sector.

Howard Archer, chief economic adviser to the EY Item Club think-tank, described the news as “disappointing” and a setback for first-quarter growth prospects. He said: “If Brexit is delayed for a prolonged period, extended uncertainty could make it difficult for the economy to grow by more than 1 per cent this year. Much would depend on how long the delay to the UK’S departure was and what final form Brexit took.

“If the UK leaves without a deal during the second quarter, the growth outlook would likely be markedly weaker over the rest of 2019 and the early part of 2020 at least. Our best bet is that GDP growth would likely come in around 0.8 per cent in 2019.” 0 Howard Archer – much depends on pace of Brexit