‘Stagnation at best’: UK’s giant services sector flatlines as Brexit uncertainty continues
![](https://www.cityam.com/wp-content/uploads/2019/11/GettyImages-145656653.jpg?w=594)
The UK’s enormous services sector flatlined in October as Brexit uncertainty dented demand, signalling a weak start to the third quarter for the UK economy.
Read more: ‘Distressing decline’: UK construction sector contracts again in October
The services purchasing managers’ index (PMI), which measures the performance of the sector, came in at 50 last month, data firm IHS Markit and the Chartered Institute of Procurement and Supply (Cips) said.
A score of 50 indicates no change in services sector output, meaning October’s score was an improvement from the 49.5 contraction seen in September and above predictions of 49.7.
The sector – everything from call centres to car washes – makes up about 80 per cent of the UK economy. Consumer spending on services has helped the UK grow in 2019 as business investment and manufacturing have receded, but there are growing signs that it is waning.
Services companies said they had less new business for the second month in a row in October. The fall in orders and a sharp drop in backlogs of work caused services sector firms to again sack workers in October, marking the fifth fall in employment in 2019.
The weakness in the services sector dragged the all-sector PMI – a gauge of private sector output – into contraction territory for the third month in a row.
“The October reading is historically consistent with GDP declining at a quarterly rate of 0.1 per cent,” said Chris Williamson, chief business economist at IHS Markit.
He said: “The underlying business trend remains one of stagnation at best.”
The UK economy contracted in the second quarter due to a Brexit-driven manufacturing slump. It is expected to escape recession when third quarter figures come out later this month, however.
Nonetheless, political uncertainty is still acting as a heavy drag on growth. Cips group director Duncan Brock said: “The sector’s main difficulties are largely of Brexit’s making and with another deadline comes more indecision and delay.”
“Without any real expectation for significant change in October, the sector stuttered and stalled delivering a lifeless set of results.”
Read more: UK economy to hit decade low even with Brexit deal, report warns
Allan Ramsay of Lloyds Bank’s business services department said the PMU score showed that “the sector is proving resilient” despite “ongoing uncertainty and the negative impact it’s having on spending and investment”.
(Image credit: Getty)