UK business activity slumped in run up to election

Early PMI results indicate falling activity in both manufacturing and service sectors

UK businesses endured a torrid December up to the 12 December general election, according to an early reading of the IHS Markit Purchasing Managers’ Indexes (PMI).

The PMI slumped to 48.5 from 49.3, its lowest level since July 2016. The unexpected downturn in activity affected both the manufacturing and service sectors. Readings below 50 indicate contraction.

The “flash” reading is taken from the responses of around 85 per cent of companies that fill in the monthly survey, and may be adjusted once full results are known at the beginning of January.

Nevertheless, the figures will make sobering reading for Boris Johnson’s Conservative government after the euphoria of its comfortable election victory.

Manufacturers have been most badly hit, with the sub-index dropping to 47.4 from 48.9, a steeper decline than expected.

The dominant services sector, which accounts for 80 per cent of the UK economy, also fell, though less precipitously. The PMI came in at 49 compared to 49.3 in November.

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Johnson has promised to end Brexit uncertainty and invest in infrastructure projects to boost the economy.

Chris Williamson, chief business economist at IHS Markit, said UK exports had suffered their worst slump in demand since 2014. But he added that gauges of future sentiment were more positive, and that there was “hope that the election will . . . remove some of the uncertainty that has been holding back demand.”

FURTHER READING: Boris Johnson’s landslide victory will calm markets, say analysts

FURTHER READING: German manufacturing falls for fourth consecutive month

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