It follows market declines on Monday after PMI figures showed the manufacturing sector, which accounts for about 10% of the United Kingdom economy, endured its sharpest fall for more than three years.
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The manufacturing Purchasing Managers’ Index fell to 49.9 last month, below June’s 50, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
The index was below the key 50 percent line for the first time since February. Readings above 50 indicate expansion while those below indicate contraction. An immediate outcome of the vote has been a depreciation of the pound’s exchange rate, which makes goods made in the eurozone more expensive for British buyers and is therefore likely to lead to a fall in demand.
Market was expecting the United Kingdom services PMI to fall to 47.4 from 52.3 in June.
It follows falls in both construction and manufacturing in July. Anecdotal evidence cited greater inflows of new work and supportive economic conditions.
Tombs added that in the past the Bank of England tended to cut interest rates by 0.5 percentage points when the PMIs were as weak as they were in July.
“Separately, the depreciation of the rupee supported Indian exporters as survey data pointed to the quickest rise in new business from overseas since January”, she said.
Data elsewhere in the Eurozone was less optimistic, however, with the Spanish manufacturing sector expanding at the slowest pace since 2013.
It added that purchase price inflation notched up to a five-year high last month, as the fall in sterling, coupled with a rise in metal and commodity prices, drove up import costs.
London’s FTSE 100 Index remained in the red amid mounting economic gloom after figures signalled the deepest construction downturn since 2009.
Companies had “widely reported that the outcome of the European Union referendum had weighed on new business”, Markit said.
‘The drops in output, new orders and employment were all steeper than flash estimates.
“The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound”.
“Admittedly, unresolved structural issues mean this pick-up is on borrowed time and we still expect growth to slow again next year”, said Julian Evans-Pritchard of Capital Economics in a report.
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But Williamson also warned that the risk of a recession was also rising.
