UK Services Sector Reports Subdued Growth
08 January 2019
The UK services sector reported subdued growth conditions at the end of 2018 - the latest indication that Brexit uncertainty is taking its toll. The IHS Markit / CIPS UK Services PMI® Business Activity Index registered 51.2 in December, up only slightly from the 50.4 scoring for November 2018, which was the lowest scoring in the past two-and-a-half years.
Survey respondents suggested that Brexit-related concerns were a key factor in stalling business-to-business spending. Subdued consumer demand was also raised as a reason for slowing sales in December. Job creation in the sector was also at its weakest level since July 2016.
Chris Williamson, the chief business economist at IHS Markit, told The Guardian:
“The service sector typically plays a major role in driving economic growth, but is now showing worrying signs of having lost steam amid intensifying Brexit anxiety.”
Services Exports in Decline
The report’s seasonally adjusted New Export Business Index was in decline for the fourth month running, posting below the no-change threshold of 50.0. December marked its sharpest decline since the index began in September 2014.
Again, Brexit was the major factor. Businesses reported that Brexit concerns had affected new business from European sources, though many firms reported rising demand from clients in the USA and Asia.
Gloomy GDP projections
The IHS Markit report came amid general pessimism about the state of the UK economy in 2019. Some economists have suggested that GDP growth in the final quarter of 2018 will have plunged to 0.1% from a rate of 0.6% in the third quarter – short of the Bank of England’s projection of 0.3%.
While there are warnings that this pessimism may be overstated, it is nonetheless apparent that the uncertainty around Brexit has taken its toll on the UK economy.
During this period of political instability, the only certainty ahead appears to be further uncertainty. In this climate, it is advised that businesses continue to plan for all eventualities.