The coronavirus outbreak has dealt the UK economy a “more severe blow” than at any time in the last 20 years, according to a flash PMI.
The IHS Markit/CIPS Flash UK Composite PMI plummeted to 37.1 in March, down on 53 in February and against the no-change reading of 50. The results are based on around 85% of usual monthly replies to the survey.
The combined fall in output across manufacturing and services has exceeded that seen at the height of the 2008 financial crash – and the figures were collected before the government’s decision to order pubs, restaurants, shops and leisure businesses to close.
Business expectations for the year ahead have slumped to the lowest since data on this started being collected in 2012.
Duncan Brock, group director at CIPS, said: “Just as the economy began to strengthen at the beginning of the year, the shock of this deepening global health crisis has flung businesses into the abyss, with the worst overall downturn in manufacturing and services for more than two decades.
“The services sector received the largest blow as citizens reduced their social activity and leisure activities were abandoned. The sector recorded its worst drop in activity since 1996 when the survey began. New orders also took a significant hit as the rapid realisation of the significance of Covid-19 applied an abrupt brake on consumer-facing businesses.
“Shortages of manufacturing components following global factory closures dislocated manufacturing supply chains and led to the greatest lengthening of delivery times since the index began in 1992. A surge in demand for food and pharmaceutical products led to rising output in some parts of the manufacturing sector, but this was more than offset by a slump in production elsewhere.”
Chris Williamson, chief business economist at IHS Markit, said the data indicated GDP was set to fall at a quarterly rate of 1.5-2%, enough to push the economy into contraction, but this was likely to be the “tip of the iceberg”.
“With additional measures to contain the spread of the virus set to further paralyse large parts of the economy in coming months, such as business closures and potential lockdowns, a recession of a scale we have not seen in modern history is looking increasingly likely,” he said.
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