UK services growth hit by 'Brexit blame'

Will Green is news editor of Supply Management
5 February 2018

Growth in the UK services sector slumped to a 16-month low in January, according to the latest PMI.

A loss of existing clients and “Brexit blame” have emerged as reasons for the slowdown, with expansion in new orders weaker than the 2017 average.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index slipped to 53 in January, down on 54.2 in December and against the no-change reading of 50.

Services firms remained optimistic with business confidence the strongest since last March, boosted by planned increases in capex, advertising efforts and greater market shares. The rate of job creation accelerated slightly to a four-month high.

Input costs rose at a robust pace amid higher prices for insurance, fuel, transport and food while selling prices were raised as firms attempted to protect profit margins.

Duncan Brock, director of customer relationships at CIPS, said: “Brexit blame has emerged once again as the reason for the slowdown in growth of services activity, which was at its lowest since September 2016 as consumers reined in spending and displayed anxieties about the future.

“However, this lack of confidence appeared to be at odds with companies as there was a significant rise in business expectations to the highest for almost a year. Some firms were also discounting to remain competitive and launching new products, which is a strong indicator that businesses expect consumers to start spending again soon.”

Chris Williamson, chief business economist at IHS Markit, said: “The January slowdown pushes the all-sector PMI into dovish territory as far as Bank of England monetary policy is concerned, historically consistent with a loosening bias. With the survey also indicating weaker upward price pressures, the data therefore cast doubts on any imminent rise in interest rates.”

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