Coronavirus pushes UK services sector to worst month on record
The UK’s dominant services sector shrank at the fastest pace on record in March, survey data has confirmed, as the coronavirus lockdown ravaged the economy.
“The services sector was sucked into a black hole and flung into the unknown,” said Duncan Brock, group director of the Chartered Institute of Procurement and Supply (Cips).
The IHS Markit/Cips services purchasing manager’ index (PMI) fell to 34.5 in March from 53.2 in February. A score below 50 on the gauge, which measures activity in the sector, signals contraction.
March’s final services PMI reading was worse than an initial estimate of 34.9 – which was already the lowest on record. The final reading reflected the worsening of the economy towards the end of the month.
Tim Moore, economics director at data firm IHS Markit, said: “Emergency public health measures to combat the Covid-19 pandemic continue to mothball business operations [and] force aggressive cutbacks on non-essential expenses.”
New work for service providers dropped at the fastest pace since the survey started in 1996. IHS Markit said the plunge was much sharper than the previous record set in the financial crisis.
Business from abroad plummeted as global travel was restricted and businesses shut across Europe.
UK economy in ‘unprecedented’ recession
The coronavirus lockdown and dire outlook pushed companies to lay off workers at the fastest rate since 2009. Britain is bracing itself for a surge in unemployment, with 950,000 claiming Universal Credit benefits in the last two weeks.
Sentiment among businesses also plunged to its lowest on record. Survey respondents “overwhelmingly” cited the uncertainty around coronavirus.
Andrew Wishart, UK economist at consultancy Capital Economics, said the British economy has entered “a recession of unprecedented scale and depth”.
He said the survey data may even be understating coronavirus’s effect on GDP. “The fact many firms have had to cease trading altogether means the true picture is much worse,” he said. “We are forecasting a 15 per cent fall in GDP in the second quarter.”