U.K. Services Stagnate Amid Persistent Brexit Uncertainty

(Bloomberg) --

The U.K.’s dominant services sector flatlined in October, the only part of the economy not to contract.

IHS Markit’s index of services activity posted a reading of 50, indicating no change in output, the firm said in a report Tuesday. That’s a slight improvement from the 49.5 seen in September, and better than the 49.7 predicted by economists in a Bloomberg survey.

Still, the figure is one of the lowest registered in more than a decade, and below the trend seen in the first three quarters of the year. New business and international demand were subdued because of the prolonged uncertainty surrounding Brexit, Markit said. Together with reports on construction and manufacturing, the survey indicates a quarterly 0.1% decline in GDP, the report said.

“The underlying business trend remains one of stagnation at best,” said Chris Williamson, chief business economist at IHS Markit.

Key Insights

• New export orders fell at the same rate as September, which was almost a record pace
• A measure of optimism among firms improved as some said a resolution to Brexit early next year could lift some of the uncertainty. Still, Markit said overall sentiment remains historically weak
• Companies are focusing on existing contracts as they struggle to get new work, leading to a loss in jobs
• The survey follows reports on manufacturing and construction, which both posted contractions
• A composite indicator of the economy rose slightly to the no-change 50 mark

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• The Bank of England will announce its latest interest-rate decision and publish new forecasts on growth and inflation on Thursday; economists expect policy makers to hold rates at 0.75%
• A separate report from Barclaycard published Tuesday showed that consumer spending grew by 1.5% year-on-year in October and that only three in 10 Britons feel positive about the state of the economy

To contact the reporter on this story: Jill Ward in London at jward98@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, David Goodman, Andrew Atkinson

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