Growth slumps to lowest in two years as businesses panic over Brexit

Marco Green
December 5, 2018

The services sector activity in the United Kingdom economy deteriorated unexpectedly in the month of November, surprising markets to the downside, a fresh report from Markit Economics showed on Wednesday.

The seasonally adjusted Nikkei India Services Business Activity Index rose to a four-month high of 53.7 in November, from 52.2 in October, as firms highlighted factors such as favourable market conditions and sales growth that boosted activity.

"The surveys are so far consistent with 0.1% GDP growth in the fourth quarter, thanks to the expansion seen back in October, but growth momentum has since been lost and risks are clearly tilted to the downside".

But the official ONS figures also pointed to weakness in September as the clock ticked down to March 2019 when the United Kingdom is due to leave the EU.

The services PMI was in the expansion territory for the sixth straight month.

They have showed deep reluctance to part with cash or invest while the Brexit outcome is unresolved. On prices, the survey noted that operating expenses in the service sector continued to increase, and in order to protect margins, service providers lifted their selling prices again in November.

A separate study it completed for MPs warned such a scenario could lead to house prices falling by 30%, unemployment almost doubling and inflation spiralling to 6.5%.

Chris Williamson, chief business economist at IHS Markit, said: "A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified".

Pollyanna De Lima, a principal economist at IHS Markit, said the welcome news "complements similar upbeat results" in the manufacturing industry, issued earlier in the week, and suggest the private sector economy "will provide impetus" to India's Q3 fiscal year 2018 GDP results.

Business optimism weakest since July 2016.

Ruth Gregory, senior United Kingdom economist at Capital Economics, described the figure as "thoroughly disappointing".

Other reports by Click Lancashire

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