The UK services sector had its worst month since March last month as optimism faded to its lowest since the aftermath of the EU referendum.
Service providers signalled the weakest expansion of the sector since the snow-hit month of March and the weakest upturn in new work since July 2016, according to the closely-followed IHS Markit/CIPS purchasing managers’ index (PMI) figures.
PMI dropped to 52.2 in October from 53.9 the previous month, the slowest rate of business activity expansion since snow hit the UK in March.
Excluding the snow-induced lows of March, services PMI in October fell to its lowest level since the referendum.
Higher transport costs, energy prices and rising staff wages also “added to the burden on the sector”, the report 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, Duncan Brock director at CIPS said.
“Many of the respondents attributed this poor performance and the biggest softening in new order growth since July 2016 to continuing ambiguity around the Brexit negotiations.”
He added: “Clarity around Brexit may turn this around but time is running out and this downward slide should be a wake-up call that progress must be made now.”
Analysts said the slowdown in growth of the construction, manufacturing and services sectors in October signalled a weak fourth quarter.
Chris Williamson, chief business economist at IHS Markit, said: “The disappointing server 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 growth to weaken sharply in the fourth quarter.”
Joshua Mahony, analyst at IG, said: "With the UK so heavily reliant upon the services sector, today’s reading highlights a likely slowdown for Q4 GDP, which is expected to come in around 0.2%."