Markit added the survey showed that the economy had “opened the third quarter on a weak footing”.
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Output and new orders both fell for the first time since the end of 2012, while optimism among companies slumped to a seven-year low, according to the flash purchasing managers’ index compiled by financial information firm Markit.
The British economy has suffered a “dramatic deterioration” in the four weeks since the United Kingdom voted to leave the European Union, new figures on Friday (22 July) showed, prompting the country’s new Chancellor to warn he may have to “reset fiscal policy” in the autumn. There is a strong likelihood that growth will have slowed from the already meagre 0.4% expansion seen at the beginning of the year.
Markit said the survey signalled a 0.4-percent contraction in the British economy in the third quarter or three months to September.
This naturally spooked investors.
In a draft statement, the Group of 20 nations said the referendum result added to uncertainty in the world economy and they hoped “to see the United Kingdom as a close partner of the European Union”. The composite index, which combines services and manufacturing, slumped to 47.7 from 52.4, the weakest reading since April 2009.
Meanwhile, activity in the country’s services arena faltered to 47.4 during the reported month, steeply lower than 52.3 seen previously.
It will be the first time that the United Kingdom has embarked on such a major project with China, and could see greater access for major Chinese banks and businesses to the United Kingdom economy.
That’s the 88-month low. This was mainly linked to the sharp drop in the sterling exchange rate.
In a joint communique sent by the financial leaders, they said: “Members of the G20 are well positioned to proactively address the potential economic and financial consequences stemming from the United Kingdom referendum”.
Adding: “The 10.4 point decline in the Services Business Expectations Index was also the largest on record”.
Britain’s new finance minister Philip Hammond was attending the G20 meeting in the southwestern Chinese city of Chengdu but did not comment to media.
The latest Markit/CIPS PMI survey looks to spell bad news for the United Kingdom economy, signalling the sharpest drop in activity since early 2009.
“The combination of a weaker pound, increased uncertainty and slower United Kingdom growth is expected to dampen Irish exports, and also weigh on confidence”, said Dr Loretta O’Sullivan, group chief economist.
The signs for the country have been mixed. However, exports picked up, driven by the weakening of the pound.
It is expected that this latest report will put more pressure on the Bank of England to implement the various economic stimuli that they have been discussing in recent weeks, including a cut to interest rates.
It also asked manufacturers whether production had gone up or down. Payrolls rose at the fastest pace in a year.
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It showed the services sector – one of the few British growth drivers – has been hit especially hard by Brexit, with orders plunging and confidence crumbling.
