UK services sector suffers from ‘worst spell’ since 2009
New data from economists Markit has indicated that the UK service sector is stagnating, partly as a result of the poor performance of the pound.
The pound has rebounded and fallen several times, although any gains have been limited by election uncertainty and the Bank of England’s (BoE) monetary policy meeting, which decided to suspend any rise in interest rates.
Data has shown that the UK services sector struggled in October as ‘new business’ fell for the second month in a row, with Brexit uncertainty blamed for dragging the country’s largest sector down to its lowest recorded level in the last decade.
The IHS Markit UK Business Outlook survey has also shown a fall in confidence amongst businesses since June. As a result, positive sentiments about trading conditions are at a 10-year low.
According to Markit, the net balance of UK private sector firms anticipating an increase in business activity during the next 12 months is +31 per cent in October, down from +32 per cent in June and well below the +44 per cent average PMI reading since the start of the survey in 2009.
The survey also indicates a slight drop in optimism since June, with the degree of positive sentiment remaining close to the ten-year low recorded at the beginning of 2019.
Profits expectations were also subdued across the UK private sector, with the net balance of firms predicting an improvement slipping to +14 per cent in October, down one per cent from June.
However, the overall drop in profits expectations is more focused in the manufacturing sectors, where optimism has slumped to the lowest level in the last three years.
Growth expectations in the manufacturing sector also slipped to the lowest since October 2011. This mirrors trends recorded by the latest IHS Markit Business Global Outlook surveys in other major developed markets, particularly in the US and Europe.
The only positive to take from the latest report is that staff hiring plans have picked up amongst some service providers.
Markit’s Chief Business Economist, Chris Williamson said: “The UK PMI surveys collectively indicated a further overall decline in private sector output in October. Contractions have now been recorded in four of the past five months, marking the worst spell since 2009 during the global financial crisis.”
With signs that the UK’s manufacturing and service sectors are slowing down it has never been more important to have professional advice at hand to assist with business restructuring and insolvency.