BREXIT’S dampening effect on the UK economy was highlighted again yesterday when a survey revealed growth of the key services sector had slowed to its weakest pace since March.
The services survey from the Chartered Institute of Procurement & Supply, and CIPS’s latest manufacturing and construction sector reports together point to a quarterly UK growth rate of only 0.2 per cent.
And they signal overall optimism in the UK private sector economy is the weakest since the immediate aftermath of the Brexit vote. Excluding July 2016, optimism is at its lowest for six years.
Optimism among services companies, about the prospects for increased activity on a 12-month time horizon, deteriorated last month to its weakest since July 2016.
Chris Williamson, chief business economist at CIPS survey compiler IHS Markit, said: “PMI (purchasing managers’ index) surveys showed UK business activity growing at a sharply reduced rate in October amid slower inflows of new orders and a deterioration in business optimism about the year ahead. Brexit uncertainty in particular continued to cloud the outlook, dampening current spending and investment, though other factors were also reported to have weakened demand, including global economic slowdown worries.”
He added: “Business expectations for the year ahead meanwhile slumped to the gloomiest since the Brexit vote [aftermath]. With the exception of July 2016, the degree of optimism was the lowest for six years, down to levels last seen during the height of the eurozone debt crisis. Optimism deteriorated in all three sectors but waned most sharply in the construction sector.”
Read More: Ian McConnell: Brexit recession risk means the Conservatives should not be laughing
CIPS’s business activity index for services tumbled from 53.9 in September to 52.2 in October on a seasonally adjusted basis. Although the index remained above the level of 50 deemed to separate expansion from contraction, it signalled the weakest pace of services sector expansion since March. The latest reading is the second-weakest since July 2016, CIPS noted.
New business growth recorded by services companies in October was the weakest since July 2016, having slowed for the third time in four months.
CIPS said: “A number of firms noted that Brexit-related uncertainty and concerns about the global economic outlook had constrained demand growth for business services. Some survey respondents also commented on subdued consumer spending in October. Consumer-facing sectors such as hotels, restaurants and leisure reported the weakest performance.”
Read More: Ian McConnell: Do not be fooled by these two Brexit tall tales from the Conservatives
Mr Williamson said: “The disappointing [services] sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy. Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP (gross domestic product) growth to weaken sharply in the fourth quarter.”
He added: “However, while it is not surprising to see that Brexit uncertainties are increasingly undermining business activity at this stage of the negotiations, the survey responses also suggest that the economy is facing other headwinds, including a broader global slowdown, trade wars, heightened geopolitical uncertainty and tightening financial market conditions.”
CIPS director Duncan Brock said: “A reluctance to commit was the message coming through loud and clear from service providers in October as the sector checked in with its worst performance since March and lowest optimism since July 2016.
“Many of the respondents attributed this poor performance...to continuing ambiguity around the Brexit negotiations.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel