UK business activity drops at quickest rate since January 2021

ANKARA

Business activity in the UK declined at the quickest rate this month since January 2021, according to a flash estimate by S&P Global on Friday.

The S&P Global/CIPS flash Composite Purchasing Managers’ Index (PMI) decreased to 48.4 in September from 49.6 in August.

A renewed fall in service sector activity was the main driver of the lower headline figure.

“This marked the first drop in services activity since February 2021, though the rate of decline was only marginal,” read a statement.

“There were a number of reports that a slowdown in sales amid the cost of living crisis and rising economic uncertainty had weighed on activity levels in September.”

Chris Williamson, the chief business economist at S&P Global Market Intelligence, said UK economic woes have deepened “as falling business activity indicates that the economy is likely in recession.”

He said companies have reported that the rising cost of living, which is linked to the energy crisis, and rising concerns about the outlook are limiting demand.

“Inflationary pressures continue to run higher than at any time in over two decades of survey history prior to the pandemic. Renewed supply constraints, soaring energy prices and rising import costs associated with the weakened pound are adding to cost pressures,” he said.

“However, the detrimental impact of tightening policy into a recession is becoming increasingly apparent, with the downturn likely to intensify as we head into winter.”

The Bank of England on Thursday raised its key interest rate by 50 basis points to 2.25%, its seventh consecutive rate hike, bringing borrowing costs to the highest level since 2008.

The bank has also decided to reduce its stock of UK government bonds by £80 billion ($90 billion) over the next 12 months, to a total of £758 billion.