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Brexit concerns hit the biggest part of the UK economy

People walk down Marylebone High Street in London, England. Photo: Jack Taylor for Getty Images
People walk down Marylebone High Street in London, England. Photo: Jack Taylor for Getty Images

The UK’s services industry has been hit by Brexit fears, according to December’s Purchasing Managers’ Index (PMI).

The PMI reflects the UK services sector’s degree of confidence for the next 12 months and came in at 51.2, the second lowest figure in the last 28 months. Anything above 50 signals expectations of growth, while anything below that level means economic contraction is expected.

Respondents to IHS Markit, who carry out the survey, said that Brexit was the biggest worry affecting their confidence.

Services PMI includes hotels, restaurants, transport, finance, and computing sectors. The retail sector, which has endured a difficult period from Black Friday in November to the festive sales, is not included.

IHS Markit’s Chris Williamson said: “The service sector typically plays a major role in driving economic growth, but is now showing worrying signs of having lost steam amid intensifying Brexit anxiety”.

Services business activity index. Graphic: IHS Markit
Services business activity index. Graphic: IHS Markit

Official data for the third quarter showed that services, which make up about 80% of the UK economy, grew by 0.5%. In addition to the PMI figure, recent surveys for manufacturing and construction suggest that GDP growth for the last quarter of 2018 was just 0.1%.

Pantheon Macroeconomics’ Samuel Tombs explained that Brexit was weighing on the economy, saying: “The continued weakness of the business activity index in December adds to evidence that the economy effectively has ground to a halt, primarily due to mounting concerns about Brexit.”

ING’s Developed Markets Economist, James Smith, said: “The underlying details emphasise Brexit uncertainty has seen new orders drop off, hitting job creation and activity.

READ MORE: UK house prices take pre-Brexit hit – Nationwide

“As was the case last month, we’d emphasise PMIs don’t necessarily tell us anything about the extent of any slowdown in activity, only that more firms are reporting worsening conditions.

“That said, it’s pretty evident that Brexit uncertainty is weighing more and more heavily on decision-making.”

The news comes as the Bank of England reported that consumer credit growth has also slowed. Credit grew by 7.1% year-on-year in November 2018, which is the weakest figure since March 2015.