UK economy ‘flatlining’ as services sector records weakest growth since the aftermath of the EU referendum
Business activity fell to its lowest rate of growth since the aftermath of the Brexit vote, according to a closely followed measure of services sector activity.
The slowdown in both ongoing business and new work saw the UK services purchasing managers’ index (PMI) hit 50.4 last month, down from 52.2 in October to count as the lowest level of growth since July 2016.
Subdued business investment and lower consumer spending were to blame for November’s lower growth, according to the PMI survey.
Higher Brexit uncertainty led to some clients delaying investment decisions, according to a number of firms, the survey found.
The news comes at a time when the government is warning of the risk of no deal as the Prime Minister tries to secure MPs’ votes for her highly unpopular withdrawal agreement ahead of parliament deciding to adopt or reject the deal next week.
Meanwhile, business optimism remained at its lowest level since July 2016 as firms await the outcome of Brexit.
A lack of new work and higher salaries saw hiring growth fall to a four-month low, despite a modest upturn in employment numbers, as firms struggled to find skilled staff.
Meanwhile, subdued demand saw businesses discount their services last month as average prices rose at their slowest rates since mid-2017.
“A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified,” Chris Williamson, chief business economist at IHS Markit, said.
“Measured across services, manufacturing and construction, the survey results suggest that the pace of economic growth has stalled.
“A contraction of service sector business activity in November was only avoided by firms working through backorders 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.”
Sterling's value fluctuated following the news, moving from 1.275 against the dollar to a low of 1.272 later this morning, before hitting 1.273.
The EY Item Club said the outlook may be worse than its prediction that GDP growth will halve to 0.3 per cent in the fourth quarter.
"The November PMI suggests the slowdown could be even more pronounced," EY's research body said. "This could result in overall GDP growth of 1.3 per cent in 2018, which would be the weakest performance since 2009."