THE private sector economy has contracted at the fastest rate on record amid concern about the impact of the Covid-19 coronavirus even before stricter curbs on movement were introduced in recent days a closely watched study has found.

The results of the latest IHS Markit purchasing managers index (PMI) survey underline the scale of the damage caused by the coronavirus to the UK economy as businesses grappled with the problems caused by plunging consumer spending and supply chain disruption.

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These sent the index tumbling to a record low this month in a development which a prominent economist said may simply have been a pointer to worse to come.

An improvement in stock market conditions yesterday did little to lighten the sombre mood. The FTSE 100 index surged nine per cent following a series of moves by central bankers in recent days to support global activity.

Howard Archer, chief economic advisor to the EY Item Club forecasting group, said the findings of the March PMI survey showed the economy buckling markedly from the coronavirus hit as restrictions on activity were increasingly imposed.

Describing the results as “awful”, he warned they could prove to be a taster for much unpalatable news on the UK economy in coming months.

“The extent of March’s weakness means that the economy is likely to have contracted in the first quarter despite coronavirus not affecting activity in January and only having a small impact in February” said Mr Archer.

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The survey was conducted before Boris Johnson last week required pubs and restaurants to close and then imposed stricter limits on movement on Monday. The restrictions effectively placed the UK under ‘lockdown’. They are likely to put businesses under extreme pressure.

The initial or ‘flash’ results of the PMI make clear that many businesses entered the latest stage of the crisis sparked by the coronavirus with their defences already seriously weakened.

The headline composite index reading fell to 37.1, from 53 in February, where 50 separates expansion from contraction. The reading was the lowest in the 22-year history of the survey.

Services firms were hit especially hard and the reading for the sector also fell to a record low, of 35.7 from 53.2.

“By far the steepest downturns in activity were signalled by hotels and restaurants and other leisure activities such as sports centres, gyms and hair salons. The initial impact of emergency public health measures was also reflected in record downturns in activity across transport and travel and the vast business-to-business services category,” said IHS Markit.

The manufacturing sector PMI reading fell to 48, from 51.7.

Mr Archer noted: “The headline PMI overstates the strength of the manufacturing sector as a marked positive contribution came from a record lengthening of supplier delivery times.” He said this was due to the disruption to supply chains stemming from coronavirus.

The PMIs were compiled between March 12 and March 20.

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Meanwhile the CBI has found that confidence levels among manufacturers have fallen to lows not seen since the financial crisis, as measured by their expectations regarding output levels in the next there months.

In its latest Industrial Trends survey, the employers’ organisation found manufacturers’ total and export order books “worsened considerably” in February.

Output fell overall for the sixth month running, largely as a result of the downturn in the motor vehicles and transport equipment sector.

Honda, BMW and Toyota have stopped production at UK plants in recent days.

Anna Leach, CBI deputy chief economist, said although the Government had offered to provide substantial support for businesses it may need to go further as the situation develops.

“The Chancellor’s offer of substantial payroll support, fast access to cash and tax deferral will help prevent job losses and alleviate some strain. But all measures must be constantly assessed to ensure the UK’s manufacturing sector emerges from this crisis with the minimum possible damage,” said Ms Leach

The call was echoed by Tom Crotty who chairs the CBI’s manufacturing council. Mr Crotty is group director of Ineos, which owns the giant Grangemouth refinery.

The Industrial Trends survey was completed between February 25 and March 13.

Stock markets in the UK and on the continent regained some ground yesterday after plunging last week. In London the FTSE 100 closed up 452.12 points, at 5,446.01.

Brent crude sold for $27.35 per barrel yesterday afternoon, up $0.32/bbl.