UK service sector activity plummets at record pace
A widely watched economic survey shows the country’s dominant service sector all but stalled in April. Widespread business shutdowns in response to the coronavirus resulted in the sharpest decline since data collection began.
Around 79% of UK service providers, such as restaurants, reported a fall in business activity. The Purchasing Managers’ Index (PMI) showed a record-low reading of just 13.4 in April, down from 34.5 in March.
Prior to the last two months, the survey’s record low stood at 40.1 in November 2008, the period of the credit crisis. Readings below 50 indicate contraction.
Purchasing managers – senior employees in businesses who keep across what is happening to a company’s orders and its supplies – see before anyone else if activity is slowing.
The data “highlights that the downturn in the UK economy during the second quarter of 2020 will be far deeper and more widespread than anything seen in living memory”, according to Tim Moore, economics director at IHS Markit, which compiles the survey with the Chartered Institute of Procurement & Supply.
Its broader composite PMI index which takes in the manufacturing sector, showed a similar drop in activity, falling from its previous record of 36 in March to 13.8 in April.
Markit said it was “by far the lowest recorded since the series began in 1998”.
Mr Moore also said the reading indicated there would be a striking drop in the official GDP figures: “Historical comparisons of the PMI with GDP indicate that the April survey reading is consistent with the economy falling at a quarterly rate of approximately 7%, but we expect the actual decline in GDP could be even greater.”
He said this was, in part, because the PMI excluded the vast majority of the self-employed and the retail sector.