Wednesday 4 December 2019 10:04 am

UK economy sent ‘staggering’ as services sector shrinks ahead of election

The UK services sector contracted last month at the fastest pace since March, survey data has shown, as domestic political uncertainty drove Brits to be cautious with their spending.

The IHS Markit/Cips services purchasing managers’ index (PMI) fell to 49.3 in November, down from a score of 50 in October. Although the reading was above the initial estimate of 48.6, a sub-50 figure puts the UK’s most important sector in contraction territory.

Read more: UK manufacturing sector shrinks for seventh straight month as election looms

Today’s services sector reading is the latest sign this week that the UK economy has slowed in the final three months of the year. The manufacturing and construction sectors both also contracted in November, data showed.

Tim Moore, economics associate director at data firm IHS Markit, said: “November’s PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019.”

The Brexit crisis and a global economic slowdown have held back the UK economy in 2019. Survey respondents said in November that the impending General Election has brought fresh uncertainty.

IHS Markit said that private sector output fell in November after stagnating in October, with the all-sector PMI hitting its joint-lowest reading since July 2016.

Subdued demand was a particular problem for the services sector in November, IHS Markit said, causing the sharpest fall in new work in over three years.

Despite lower workloads, staffing numbers stabilised last month. This compares with the manufacturing and construction sectors, which laid off workers in November.

Duncan Brock, group director at Cips – the Chartered Institute of Procurement & Supply – said Brexit nerves also “descended over European clients in particular who were reluctant to commit until there is more clarity in the UK’s future direction”.

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said he was “skeptical” that “services output really is declining”.

Read more: UK construction sector shrinks again amid political uncertainty

“For a start, the services PMI does not cover the retail and public sectors, which have retained their momentum this year.” He added that the PMI seems to be “excessively downbeat during periods of political uncertainty”.

Ruth Gregory, senior UK economist at Capital Economics, was more pessimistic. She said the November readings indicated that “GDP growth has slowed sharply in the fourth quarter and perhaps even turned negative”.

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