UK business activity suffers sharpest contraction since early 2021

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British businesses last month suffered the sharpest contraction in activity since early last year, although the downturn was a little less severe than first estimated, a survey showed on Wednesday.

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The final version of the S&P Global UK Composite Purchasing Managers’ Index fell to 49.1 in September from 49.6 in August, the lowest reading since January 2021 when much of the country was still in a COVID-19 lockdown.

Any reading below 50 means a contraction in activity.

While the reading was an improvement on a preliminary “flash” reading of 48.4, services companies that comprise the bulk of the private-sector economy were the least positive about the outlook since May 2020, early in the pandemic.

Overall the survey chimed with other indicators that suggest Britain’s economy is flirting with recession.

“Service sector businesses trimmed their growth expectations to the lowest seen for nearly two-and-a-half years in September, which survey respondents linked to concerns about falling disposable income and the unfavorable global economic outlook,” said Tim Moore, economics director at S&P Global Market Intelligence.

The PMI for the services sector fell to 50.0 from 50.9 in August, signifying stagnation but still better than the flash reading of 49.2.

New orders from both home and abroad declined in September, with survey respondents blaming Brexit and a weaker world economy, as well as subdued confidence and customers cutting costs.

Inflation pressure remained close to the record high recorded in May, as businesses reported “unavoidable” price increases due to higher bills for wages, energy and supplies.

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