“Triple-whammy” of bad economic news as UK services growth slows again
The latest reports show growth of UK manufacturing, construction & services have all slowed. The Brexit slowdown is here.
Figures released today show UK services growth has slowed again to a four-month low. The report by IHS Markit & CIPS showed services growth at 53.4 in June, down from 53.8 in May. More worryingly, the report showed growth of new business at a nine-month low with business optimism dropping to its second-lowest since the end of 2011 (it dipped lower last summer after the referendum).
The report is based on PMI (Purchasing Managers’ Index) data compiled from a survey of carefully selected companies. The surveys are used to provide an early indication of what’s happening in the private sector economy. You can read more about PMI data at markiteconomics.com.
For this survey, respondents cited anxiety over Brexit negotiations as well as worries about the general economic outlook and political uncertainty. With Brexit negotiations just beginning and the government still not entirely clear about what it wants or even if it will remain in government, it’s not looking good.
And even if the UK and EU are able to agree a new free trade deal post-Brexit, it’s unlikely to include services as a report by the National Institute for Economic and Social Research explains.
In better news, the services PMI survey also showed job creation at a 14-month high. However, commenting about the report, CIPS director of customer relationships at CIPS Duncan Brock noted businesses indicated they were struggling to find “good-quality, skilled workers” and that respondents cited “lower availability of staff as a reason for their difficulties”. It seems that even before any new immigration restrictions are put in place, businesses are already struggling to access the labour and skills they need. This is a problem that other industries including the agriculture, hospitality and public services have also said they are experiencing.
The struggle for good-quality, skilled workers continued and some respondents pointed to lower availability of staff as a reason for their difficulties.
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement and Supply (CIPS)
Services joins manufacturing and construction in slowed growth for June
The UK services sector isn’t alone in experiencing a slowdown in growth. Other PMI reports this week published by IHS Markit & CIPS showed growth slowed for UK manufacturing and UK construction as well. IHS Markit chief business economist said “a slowing in services sector growth completes a triple-whammy of disappointing PMI survey readings”.
On top of this, the Society of Motor Manufacturers and Traders (SMMT) also published the latest figures for new car registrations showing a decline in June.
All three of the PMI reports show new business growth particularly easing with business optimism lower. Basically, business confidence is down. And the SMMT report showing a car sales decline across private, fleet and business registrations seems to support the idea that business (as well as consumer) confidence is down.
Meanwhile as we noted in our report about UK manufacturing, it’s a different story in the Eurozone. For services and manufacturing, the Eurozone saw growth rates at a six-year high.