The UK economy is slowing – and it’s not all down to Brexit
The April purchasing managers' indexes (PMIs) painted the bleakest picture of the UK economy so far this year. The surveys signal a near-stalling of economic growth, down to just 0.1 per cent.
How worried should we be?
News that the surveys saw an increased number of companies complaining about ‘Brexit’ uncertainty caught the headlines, suggesting that we could see growth bounce back if the Remain camp wins. There’s also a chance that April’s data were subdued by an earlier than usual Easter.
Read more: Services completes the hat-trick of falling PMIs
However, we need to pause before we write this off as a temporary blip. There’s a more fundamental slowing in the economy that’s been evident for some time now, linked mainly to the international environment, which has deteriorated further this year.
Markit’s worldwide PMI surveys showed global growth so far this year running at its weakest since late 2012. Ongoing emerging market malaise has been joined in recent months by a renewed downturn in Japan, ongoing sluggish growth in the Eurozone and – most importantly – a steep slowing of the US economy.
| Markit/CIPS PMI | Lowest score since |
| Services | February 2013 |
| Manufacturing | February 2013 |
| Construction | June 2013 |
While UK firms are worried about Brexit, the surveys indicate their US counterparts are beginning to worry about the presidential election. In Europe, the European Central Bank is stoking the fire with more stimulus, but political uncertainty caused by the migrant crisis is cooling demand.
In Asia, the slowdown in global trade has hit manufacturing, China remains a concern in terms of a possible ‘hard landing’ and confidence in Japan’s policymakers has slumped after the introduction of negative interest rates.
Read more: UK economic growth slows to 0.4 per cent
Being an open economy, the UK is therefore currently caught in a number of international crosswinds, which means that growth may not necessarily rebound for long – even with a favourable referendum outcome.
Lurking in the background is the reminder from the recent Budget that deficit reduction gets tougher the weaker the pace of economic growth, meaning more austerity for longer.
Fingers are crossed that, whatever the referendum outcome, uncertainty subsides and the economy picks up steam again.
The worry is that the referendum is a mere side show to a renewed phase of slower global economic growth that policymakers are going to have to deal with.