United Kingdom 'at risk of slipping into recession'

Andrew Cummings
September 4, 2019

The dent to optimism primarily reflects "concerns about the impact of domestic political uncertainty on client decision-making", said IHS Markit, a research firm that compiles the services sector purchasing managers' index (PMI).

According to the latest IHS Markit's Purchase Managers' Index (PMI), it signals that the United Kingdom economy is contracting at a rate of 0.1% and unless something brings about a bounce in September, Britain could slide into a recession. However many panellists reported observing a drop in United Kingdom orders due to the Brexit uncertainty, the survey's authors said.

The survey showed that many service providers were relying on backlogs of work to sustain growth as new orders weakened to reach their slowest level in seven months, with new work from overseas being particularly sluggish.

United Kingdom 'at risk of slipping into recession'

The headline figure came below market expectations of 51.0, and well below the 51.4 seen in the previous month. Furthermore, business confidence fell sharply to its lowest level since December 2011.

The sector shrank at the fastest rate since 2012 in August, the fourth consecutive month of contraction, with a PMI reading of 47.4 for July. It also highlighted "intense" pressure on operating margins at service sector companies.

IHS Markit said Brexit uncertainty and higher business costs were to blame.

Business activity and job creation in Germany's services sector remained robust in August despite a recession in manufacturing, a survey showed on Wednesday, but a loss of business confidence pointed to a rocky road ahead for Europe's largest economy.

Increasing uncertainty around Brexit has contributed to weaker activity in the manufacturing and services sectors in the last few months.

At 52.6 in August, the Composite PMI Output Index posted in expansion territory for the 18th month in a row.

'After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the United Kingdom economy is slipping into recession, ' Chief Business Economist at IHS Markit Chris Williamson said.

"While the current downturn remains only mild overall, the summer's malaise could intensify as we move into autumn", he said.

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