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UK economy loses steam as new coronavirus curbs hobble recovery

Britain's Prime Minister Boris Johnson looks at doors of washing machines at Ebac electrical appliances manufacturer during a General Election campaign trail stop in Newton Aycliffe, Britain November 20, 2019. Frank Augstein/Pool via REUTERS     TPX IMAGES OF THE DAY
Britain's prime minister Boris Johnson visiting a factory last year. Photo: Frank Augstein/Pool via REUTERS

Britain’s economy is losing steam as the resurgence of the coronavirus and rising restrictions hobble firms’ efforts to recover from the crisis, according to purchasing managers’ index (PMI) data released on Friday.

Both the dominant services sector, which makes up around four-fifths of the economy from cafes to banks, and manufacturing saw growth slow this month.

Business levels continued to edge higher in October, but at a slower pace than in September and at the weakest rate in four months.

The survey is a closely watched sign of the health of Britain’s economy, and the latest figures underline the impact of rising infection rates and government curbs on businesses nationwide.


Services firms said local lockdowns and hospitality restrictions had dampened general consumer spending. Respondents said levels of new business had declined for the first time since June, and October’s figures were worse than expected by analysts.

READ MORE: UK businesses in Tier 2 lockdowns get extra government support

Companies said shrinking demand from customers was forcing them to make redundancies. “October data indicated a steep fall in employment numbers, with another month of deep job cuts signalled in both the manufacturing and service sectors,” said the latest PMI report, published by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).

The headline reading on the PMI for services came in at 52.3 in October, down from 56.1 in September. The figures are measured on a scale from 0 to 100, with readings above 50 marking growth and below 50 showing decline. Manufacturing came in at 53.3, down from 54.1 last month.

Chris Williamson, chief business economist at IHS Markit, said: “The pace of UK economic growth slowed in October to the weakest since the recovery from the national COVID-19 lockdown began.

“Not surprisingly the weakening is most pronounced in the hospitality and transport sectors, as firms reported falling demand due to renewed lockdown measures and customers being deterred by worries over rising case numbers.”

READ MORE: UK retail sales surged in September

The data comes amid tightening restrictions as cases have risen in large parts of the UK, with pubs and bar closures among the strictest measures imposed in Liverpool, Lancashire, South Yorkshire, and Greater Manchester.

London is also among the areas counting the cost of being moved into Tier 2, which includes a ban household mixing indoors that has also hit hospitality, entertainment and other services firms.

The chancellor Rishi Sunak has caved into pressure to provide more support for firms and workers hit hard by increased restrictions, ramping up spending to help employers and staff three times within the past month.

WATCH: What is the job support scheme and how has it changed?

But retail data released separately on Friday painted a more promising picture for September at least. Retail sales continued to rebound in Britain last month, smashing forecasts for growth, according to the official figures.

The Office for National Statistics said on Friday that retail sales grew by 4.7% in September. Month-to-month sales grew by 1.5%.

Economists had expected annual sales growth of 3.7%, or 0.4% on a monthly basis.

Sales were driven by DIY and garden items, as well as a revival in supermarket food sales as the Eat Out to Help Out scheme came to an end.

The data confirmed the fifth consecutive month of growth for retail sales and marks an acceleration in growth. Sales grew by 2.3% in August, undershooting economists’ forecasts.