Brexit fears cast a deep chill over UK growth prospects on Monday as Theresa May desperately gropes for a breakthrough in negotiations with the European Union.
The latest alarming snapshot from the biggest slice of the economy, the services sector, showed the pace of expansion at its weakest for seven months and new business wins at a two-year low.
October’s Chartered Institute of Procurement and Supply activity index, where a score over 50 signals growth, weakened from 53.9 to a far worse than expected 52.2, the worst since March.
If that trend continues, the economy is on track for growth of just 0.2% in the final quarter of the year, less than half the pace of the previous three months. Chris Williamson, chief business economist at survey compiler IHS Markit, said the economy’s expansion was likely to “weaken sharply”.
He added: “The disappointing numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy.”
Service covers a clutch of businesses from hairdressers to IT professionals. Consumer-facing sectors such as hotels, restaurants and cinemas saw the weakest performance.
Manufacturers also saw stuttering growth over the month, while housebuilders have warned over growing housing market caution in a difficult autumn for the economy.
While the Prime Minister is reportedly hopeful of sealing a deal with Brussels, any agreement is unlikely to be voted on until December at the earliest, spelling lingering uncertainty.
Cips director Duncan Brock said firms were reluctant to commit, while higher wage bills and energy prices were adding to the pressure. “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,” he said.
The gloom comes after Bank of England Governor Mark Carney warned last week that nervy businesses were “understandably” delaying investment.
But the UK’s Brexit-related woes come against a darkening global backdrop of cooling European growth, worries over China and a belligerent White House ramping up trade tensions with the rest of the world. US growth is expected to cool next year.
WorldFirst chief economist Jeremy Thomson-Cook said: “Until a deal is done, business confidence and sentiment will only move lower.”
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