FEARS are mounting over the health of the UK economy, after key surveys signalled it stagnated last month as Brexit choked off growth.
The key services sector recorded the first monthly fall in its workforce for more than six years in January. And services companies signalled their first overall fall in new orders since July 2016, when the UK economy was reeling in the immediate aftermath of the Brexit vote outcome, according to the survey published yesterday by the Chartered Institute of Procurement & Supply.
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CIPS’s seasonally adjusted business activity index for services dropped from 51.2 in December to 50.1 in January, only marginally above the 50 no-change mark.
Services companies had “overwhelmingly linked” the slowdown in activity growth to “heightened political uncertainty” at the start of 2019, CIPS noted.
It added: “Service providers reported Brexit-related concerns had dampened client demand and resulted in delayed decision-making on new projects.”
The latest monthly surveys of the UK manufacturing and construction sectors from CIPS have also highlighted weakness in these sectors, amid Brexit fears. UK manufacturers stockpiled inputs last month at the fastest pace since comparable records began 27 years ago.
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CIPS’s all-sector PMI fell to 50.3 in January, its second-lowest since December 2012, from 51.5 in December.
Chris Williamson, chief business economist at CIPS survey compiler IHS Markit, said: “Comparisons of the PMI (purchasing managers’ indices) with official data indicate that GDP (gross domestic product) likely stagnated at the start of 2019 after eking out modest growth of just 0.1 per cent in the fourth quarter. Such a subdued start to the year, combined with worrying signs of global economic weakness, suggest economic forecasts for growth in 2019 are likely to be revised lower.”
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said of CIPS’s services sector survey: “There is no masking the fact that this is a seriously disappointing report on the UK economy. Services activity essentially stagnated in January, while the drop in new business does not bode well for activity in the near term at least.”
Mr Archer added: “The survey magnifies the evidence that the UK economy has seen a poor start to 2019 amid heightened Brexit and political uncertainties as well as a weakening global economic environment.”
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