Brexit drags on UK services firms in December, finds survey

Purchasing managers reported that uncertainty related to our departure from the EU continued to deter their clients from investing at the end of last year

The transport sector is covered by the services PMI (PA)

Brexit continued to weigh on the UK’s dominant services sector in December, according to the latest survey snapshot.

Purchasing managers reported uncertainty related to Britain’s departure from the EU continued to deter their clients from investing at the end of last year.

The implied rate of services job creation slipped to its lowest in nine months and cost inflation hit its highest since September.

However, the overall Purchasing Managers’ Index (PMI) strengthened to 54.2 from 53.8 previously, with any reading over 50 signalling growth. City of London analysts had pencilled in a flat reading.

“December saw a welcome upturn in service sector activity, highlighting the continued resilience of the economy as 2017 came to an end,” said Chris Williamson of IHS Markit, which compiles the PMI survey.

“However, as has been increasingly the case in recent months, the good news comes with a health warning about the sustainability of the upturn. Digging into the details behind the resilient strength signalled by the headline numbers, the survey data reveals an economy that is beset with uncertainty about the outlook, which is in turn dampening business spending and investment.”

Services firms account for around 80 per cent of the UK economy.

PMIs for construction and manufacturing earlier this week also showed expansion in December, although construction was still hampered by Brexit uncertainty.

The three PMIs together are consistent, on historic patterns, with overall GDP growth for the UK in the final quarter of 2017 of 0.4-0.5 per cent.

That would be in line with the 0.4 per cent rate in the third quarter, as estimated by the Office for National Statistics.

“The likelihood is that the resilience of the economy will be increasingly tested by the prevailing uncertainty and anxiety about the future as we move in to 2018, suggesting growth will slow in the absence of greater clarity and reassurance regarding a favourable Brexit outcome,” said Mr Williamson.

The services PMI, covers industries ranging from transport, to communication, to restaurants, although it excludes shops.