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UK private sector in ‘worst period of contraction since financial crisis’ as Brexit uncertainty hits confidence



The UK’s service sector stagnated last month while car production slumped 6.7 per cent in the latest signs that Brexit uncertainty is damaging the economy.

Output by services firms, which make up four fifths of the UK economy, flatlined in September according to a closely watched poll of purchasing managers.

When combined with disappointing construction and manufacturing data this week, the figures suggest that the UK private sector has contracted in four of the past five months, its worst spell since the financial crisis in 2009, IHS Markit said.

IHS Markit’s Purchasing Managers Index, which is designed to give an early indicator of the economy’s future health, came in at 50 for October which suggests zero growth – although it was up marginally from 49.5 the month before.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “In terms of staff hiring, this is one of the worst service sector performances since 2011, as job creation became job cutting for the fifth time this year.

“Even the impending October [Brexit] deadline was not enough to stem the flow of hopelessness amongst service providers, as optimism remained at low levels.”

Some economists have warned that surveys of purchasing managers have in recent months become less reliable as a predictor of future growth. Actual output has come in above the level that polls have suggested.

Nonetheless, the figures demonstrate the level of confidence among British businesses and show Boris Johnson’s Brexit deal has received only a “luke-warm” reception from British firms, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Services account for four fifths of UK output and had, until recently, remained relatively resilient in while construction and manufacturing contracted sharply.

Among the worst-hit sectors has been the car industry which has seen investment collapse since the 2016 EU referendum. New data released on Tuesday showed a further 6.7 per cent slump in the number of vehicles rolling off production lines in October.

Some 10,348 fewer cars were registered in October than during the same month in 2018, according to the Society of Motor Manufacturers and Traders (SMMT).

The figure reflects a tough environment for businesses and consumers as economic and political uncertainty continue to hit confidence, the trade association said.

The decline was driven by a 13.2 per cent drop in demand from private consumers. Sales of diesel models slumped 28.3 per cent, while petrol cars fell by 3.2 per cent.



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