HomeGrowth & Tech'Worse to come' with UK economy 'grinding to a halt'

‘Worse to come’ with UK economy ‘grinding to a halt’

The UK economy is “grinding to a halt”, with a big drop-off in consumer spending damaging private sector firms, a new survey has found.

According to S&P Global’s latest purchasing managers’ index (PMI), activity among services firms dropped to a 15-month low of 51.8 in May, below expectations and down sharply from April’s reading of 58.9. A reading above 50 indicates most firms reported growing activity.

There is growing concern Britain is hurtling toward a recession due to living costs accelerating much quicker than forecast at the start of the year.

Inflationary pressure reaching unprecedented levels

The survey indicates the economy is “almost grinding to a halt as inflationary pressure rises to unprecedented levels”, according to Chris Williamson, chief business economist at S&P Global Market Intelligence.

Inflation is forecast to climb above 10% after the summer, sparked by the energy watchdog raising the cap on bills again to account for higher wholesale oil and gas prices caused by Russia’s invasion of Ukraine.

“Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China’s lockdowns and the war in Ukraine,” Williamson told Reuters.

These projections, alongside weakening business confidence, indicate “worse is to come.”

UK economy shrinks by 0.1% in March

Data published by the Office for National Statistics (ONS) in May showed that the economy shrunk 0.1% in March, showing output was under pressure even before the cost of living crunch intensified.

The ONS found that services firms’ costs grew at the fastest rate on record this month, with rising wage bills one of the biggest contributing factors.

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