Britain’s services sector, which accounts for more than 75% of the country’s GDP, is tumbling towards a recession, according to the latest data on growth.
The services sector — which accounts for everything from banking to waitressing — saw its biggest monthly fall in activity between June and July since records began.
It completes a trilogy of dreadful post-Brexit economic figures released this week, following sharp slowdowns in the manufacturing and construction sectors.
Every major constituent of UK economy is now shrinking in the wake of Britain’s vote to leave the European Union.
Meanwhile, figures released on Wednesday also show the eurozone economy has been largely untouched by the Brexit decision. Economically, Britain has cut off its nose to spite its face.
The biggest services slowdown on record
PMI data released by Markit and the Chartered Institute of Procurement & Supply on Wednesday morning shows the service sector headline reading came in at 47.4 for July. That was down from 52.3 in June. It’s the steepest month-on-month decline since PMIs began in 1996, according to the BBC’s Economics Editor Kamal Ahmed.
PMIs are given as a number out of 100, with anything above 50 signalling growth and below signalling contraction.
Clearly, the UK’s shock vote to leave the European Union on June 23 has dealt a hammer blow to the service sector. Wednesday’s figures marks the first contraction in the services sector in more than four years and confirms the bleak flash estimates provided by Markit and CIPS on July 22.
The readings also showed the sharpest decline in both output and new business in the services sector in more than seven years.
Speaking about Wednesday’s services data, Markit’s chief economist, Chris Williamson, said (emphasis ours):
“The marked service sector downturn follows news from sister PMI surveys showing construction activity suffering its steepest decline since mid-2009 and manufacturing output contracting at the fastest rate since late-2012. At these levels, the PMI data are collectively signalling a 0.4% quarterly rate of decline of GDP.
“It’s too early to say if the surveys will remain in such weak territory in coming months, leaving substantial uncertainty over the extent of any potential downturn. However, the unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.”
Here is Markit’s terrifying chart, showing just how massive the contraction in post-Brexit Britain has been so far:
When Markit released its flash reading in July, Williamson noted that the economy “saw a dramatic deterioration,” in July, and that “dramatic deterioration” has now been confirmed.
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