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UK services picks up in July but businesses fear it “stalling” over Brexit

The latest report for UK services show country on course for “steady but sluggish growth” but warns economy could stall or contract over Brexit.


The latest Purchasing Managers’ Index (PMI) data for the UK’s services sector show activity picked up in July, rising to 53.8 from 53.4 in June. However, the report by IHS Markit and CIPS warned the rate of expansion as well as optimism for the business outlook “remained subdued”.

The PMI report is based on data compiled from a survey of purchasing managers from 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.

The report said business expectations for the next year remained weak with “the latest reading among the lowest on record since late-2012”. It added that “Brexit-related uncertainty continued to weigh on their growth prospects for the year ahead”.

It’s the third PMI data release this week for July and as the services sector accounts for 80% of the economy, it’s the most anticipated. Like the report for manufacturing, the growth rate for the services sector showed a mild improvement on the previous month. However, construction data out yesterday showed a sharp slowdown. Overall, July has had better news for the economy than June when all three PMI reports showed growth slowing.

GDP growth in the second quarter of this year is estimated at 0.3%. IHS Markit chief business economist Chris Williamson said the three PMI surveys together “are broadly consistent” with the GDP estimate. He added this puts “the country on course for another steady but sluggish expansion in the third quarter”.

However, Williamson also warned that firms’ prospects for the year ahead had “slipped to a level which has previously been indicative of the economy stalling or even contracting”. He added this reflected “heightened uncertainty about the economic outlook and Brexit process”.

Consumers and businesses hesitant to spend

The report for the construction sector highlighted a hesitancy by clients to invest. Similar comments were made by respondents to the services PMI survey. Commenting about the services PMI data, CIPS director of customer relationships Duncan Brock said “purchasing managers cited continuing ambiguity around Brexit and the concerns about the strength of the economy as responsible for the sector’s damp performance as consumers and businesses alike were hesitant about spending”.

Later today, the Bank of England is due to announce its decision on interest rate as well as publish its latest inflation report.

Sharp slowdown in construction as clients’ more reluctant to invest


Image: © Jeanette Teare / Shutterstock.com
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