The UK economy has slowed further than many expected in January, according to the leading economic index.
Newly released UK PMI figures show the slowdown has been driven by a collapse in the services side of the economy.
The overall PMI figure for January is 40.4, and 38.8 for services – the lowest reading for eight months. Any score lower than 50 indicates contraction.
Economists had expected a slowdown, with the predicted overall PMI figure hovering around 45, but this more aggressive slowdown is sure to spook markets.
The UK economy is highly reliant on the services industry, which makes up around 70 per cent of GDP.
Manufacturing output also slipped, but remained above the crucial 50 score, meaning that it avoided contraction.
Unsurprisingly, IHS Markit, which compiles the survey, said that the new lockdown was to blame for the sudden plunge.
Chris Williamson, chief business economist at IHS Markit, said that the slump meant that a double dip recession was all but guaranteed.
He also pointed to the widespread supply delays, rising costs and falling exports as a result of Brexit as another reason for the tumble.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that the readings were consistent with estimates for a 5.0 per cent drop in GDP in January.
That would leave the GDP some 12 per cent down on pre-Covid levels.
But on the upside, Williamson added that companies were far more positive about the year ahead than during previous lockdowns.
“Encouragingly, the current downturn looks far less severe than that seen during the first national lockdown, and businesses have become increasingly optimistic about the outlook, thanks mainly to progress in rolling out COVID-19 vaccines”, he said.
Manufacturing output fell to 50.3, also an eight month low, in January, due to weaker export orders and short-term supply chain difficulties.
The survey also noted that the last month has seen the greatest increase in delivery times recorded in its 30-year history, due to widespread disruption at the UK’s ports.