Coronavirus drives UK private sector to worst month on record
The UK private sector suffered its worst month on record in April, survey data has confirmed, as coronavirus lockdown measures caused demand to evaporate.
The IHS Markit/Cips composite purchasing managers’ index (PMI), a closely watched gauge of the health of the economy, slumped to 13.8 in April from 36 in March, which was the previous record low.
However, the reading was slightly better than an initial estimate from IHS Markit/Cips of 12.9. A score below 50 indicates contraction.
The plunge in output was driven by the UK’s dominant services sector, which makes up around 80 per cent of the economy. It has been battered by coronavirus lockdown measures.
Services activity cratered, with new work and backlogs falling at the fastest pace since data firm IHS Markit started compiling records more than 20 years ago.
As business dropped off, companies laid off employees at the fastest rate on record. Many firms said they were using the government’s job retention scheme to “furlough” workers. But they warned that they could be forced to lay off workers permanently if government support is not extended past June.
IHS Markit economic director Tim Moore said the dire PMI reading is consistent with a fall in GDP of seven per cent in the second quarter.
Yet he added: “We expect the actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector.”
The UK’s Office for Budget Responsibility last month produced a “scenario” in which UK GDP shrank by 35 per cent in the quarter.
Duncan Brock, group director at Cips, the Chartered Institute of Procurement and Supply, warned that the economy could be scarred by coronavirus.
“The scale of this fall is unnerving,” he said. “A significant number of businesses in shutdown now may never reopen.”
“The flow of activity will take planning, government support and an end to the pandemic in sight to have a strong effect on the biggest driver in the UK economy.”