Coronavirus Pushes British Companies Into a Record Slump

(Bloomberg) --

U.K. businesses are being dragged into the biggest slump in modern memory by the shutdown to contain the coronavirus.

IHS Markit’s monthly measure of manufacturing and services activity dropped to the lowest since the series began in 1998, it said Tuesday. Euro-zone figures reported earlier painted a similarly bleak picture.

Bloomberg Economics forecasts that the British economy will shrink nearly 9% in the second quarter alone. That would be the worst quarterly performance since 1921.

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The U.K. PMI report may not even capture the true extent of the downturn, as it was compiled before the government ordered the temporary closure of businesses such as pubs and restaurants late last week.

“Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare,” said Chris Williamson, chief business economist at IHS Markit. “Demand elsewhere has collapsed, both for goods and services, as increasing numbers of households and businesses at home and abroad close their doors.”

IHS Markit’s headline reading dropped to 37.1 from 53.0 in February, with services especially badly hit.

The fallout has forced the Bank of England and the government to release emergency stimulus. Interest rates have been cut to almost zero and the government has promised to cover workers’ wages as well as launching a package of grants, loan guarantees and tax cuts worth more than 350 billion pounds.

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