Service sector growth slowed in August amid the prevailing Brexit chaos, new data revealed on Wednesday.
Confidence regarding activity during the next 12 months hit its lowest level since July 2016. The report said that this primarily reflects concerns surrounding domestic political uncertainty and its impacts on client decision making.
As the Brexit deadline looms closer, the only certainty for the nation at this point is additional uncertainty.
The IHS Markit/CIPS UK Services PMI Business Activity Index dropped to 50.6 in August, down from July’s 51.4 reading. The report said that this signals “marginal expansion” of service sector output.
The survey also shows slower increases in new work and staffing levels, which was linked to “sluggish underlying economic conditions”.
The Brexit Halloween extended deadline is fast approaching. Just last week, Boris Johnson asked the Queen to suspend parliament, preventing MPs from blocking a no-deal departure from the European Union.
Boris Johnson has said that if Labour and rebel Conservative party members succeed in blocking a no-deal Brexit, he will call for a general election on 15 October.
The GBP/USD rallies towards 1.22 as the chances of a hard Brexit begin to fade.
“Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers,” Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey, commented on the data.
“So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services,” Chris Williamson continued.
“While the current downturn remains only mild overall, the summer’s malaise could intensify as we move into autumn. Companies have grown increasingly gloomy about the outlook due to the political situation and uncertainty surrounding Brexit, adding to downside risks in coming months.”
“With the exception of the slump in sentiment after the 2016 referendum, August saw service sector firms at their gloomiest since the height of the global financial crisis in early 2009.”
