FEARS that UK growth could be stalling have been fuelled by a sharp slowdown in expansion of the UK’s dominant services sector to its weakest pace since February 2013.
The Chartered Institute of Procurement & Supply (CIPS), revealing the services sector slowdown in April, signalled that uncertainty ahead of the June 23 referendum on UK membership of the European Union had been among the factors weighing on activity in April.
Surveys earlier this week from CIPS have shown that the UK manufacturing and construction sectors last month also turned in their weakest performances since 2013. As well as EU referendum uncertainty, the impact of Government spending cuts is also being flagged as a factor weighing on growth.
Chris Williamson, chief economist at survey compiler Markit, noted the combined output index derived from the services, manufacturing and construction surveys had dropped from 53.6 in March to 51.9 in April.
He warned: “The latest reading is consistent with a near-stalling of economic growth.”
Mr Williamson calculated that, if the combined index stayed at its April level in May and June, it would point to quarter-on-quarter growth of just 0.1 per cent in the three months to June.”
Figures published by the Office for National Statistics last week showed UK gross domestic product growth slowed to 0.4 per cent in the first quarter, from an already below-trend 0.6 per cent in the final three months of last year.
Mr Williamson said: “April saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already weak demand linked to global growth jitters and ongoing Government spending cuts.”
CIPS’s business activity index for the dominant UK services sector fell from 53.7 in March to 52.3 in April on a seasonally-adjusted basis. The services survey does not include retail.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: “The hugely disappointing services survey completes an unwanted and worrying hat-trick of weakened UK purchasing managers’ surveys.
“The weaker services sector is particularly significant as the dominant sector was entirely responsible for UK GDP growth of 0.4 per cent quarter-on-quarter in the first quarter.”
He added: “There is now compelling evidence that heightened uncertainty ahead of June’s referendum on EU membership is taking an increasing toll on economic activity. A much-weakened set of April purchasing managers surveys for the services, manufacturing and construction surveys follows on from consumer confidence weakening to a 16-month low in April and the CBI (Confederation of British Industry) reporting lacklustre retail sales.”
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