UK services sector set for weakest quarter since 2012 amid Brexit uncertainty
The UK services sector look set for its weakest quarter since 2012 as a subdued start to the year continued last month.
Business activity expanded marginally in February but new work fell for a second consecutive month, according to the widely-regarded IHS Markit / CIPS purchasing managers’ index (PMI).
Employment numbers also declined at the fastest pace since November 2011 as businesses delayed hiring staff amid soft demand and concerns over the UK’s economic outlook.
The survey revealed that Brexit remained the key factor holding back business activity growth.
CIPS director Duncan Brock said: “Once again this month, the lifeblood of the sector continued to leak away with Brexit indecision striking another blow to new orders and employment in February.
“Any hoped-for progress next month looks like it will be equally stifled, as services activity heads for its weakest quarter since late 2012.”
IHS Markit economist Chris Williamson said the data, along with other recent surveys suggested the UK economy was on track to grow just 0.1 per cent in the first quarter.
He said: “The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU.”
He added: “Many Brexit-related headwinds and uncertainties also look set to linger in coming months even in the case of PM May’s deal going through.
But the slight expansion in business activity beat expectations, offering at least a crumb of positivity for the sector.
"The survey suggests that at least some of the concern about Brexit's impact on the economy has been overdone," UK economist at Capital Economics, Thomas Pugh said.
"However, worries about future demand now appear to be seeping into hiring decision, weighing on employment growth."
EY Item Club economist Howard Archer described the upturn as "marginal relief at best" for the UK economy but said it still pointed to a weak quarter.