Brexit fears hit UK services firms in December, survey shows

The degree of confidence among firms over the next 12 months dipped to its second-weakest since March 2009

Brexit fears hit UK services firms in December, the latest survey snapshot of the sector showed.

The degree of confidence among firms over the next 12 months, as measured by the Purchasing Managers’ Index, dipped to its second-weakest since March 2009, with Brexit cited by respondents as the biggest worry.

The overall headline activity index was 51.2 in the month, up only slightly from the 28-month low registered in November.

“The service sector typically plays a major role in driving economic growth, but is now showing worrying signs of having lost steam amid intensifying Brexit anxiety,” said Chris Williamson of IHS Markit, which compiles the survey.

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

The most recent official data shows that the sector grew by 0.5 per cent in the third quarter of the year, helping deliver overall GDP growth of 0.6 per cent.

But combined with recent surveys of the manufacturing and construction sectors, the services PMIs are consistent with GDP growth crashing to just 0.1 per cent in the final quarter of 2018.

Close to 28-month low

“The continued weakness of the business activity index in December adds to evidence that the economy effectively has ground to a halt, primarily due to mounting concerns about Brexit,” said Samuel Tombs of Pantheon.

"Clearly the economy has slowed since Q3, but we think this survey is overstating the extent of the easing a bit," said Paul Dales of Capital Economics. "If a Brexit deal is agreed soon, growth will surely rise this year."

The services PMI covers sectors such as hotels, restaurants, transport and finance, although not retail.

Separately, the Bank of England reported on Friday that unsecured lending to British households slowed to an annual rate of 7.1 per cent in November, the slowest rate since March 2015.

The number of new mortgage approvals for house purchases also fell to 63,728 in the month, well below the expectations of City of London analysts.