News ID: 155442
Published: 0704 GMT July 22, 2016

Brexit plunges UK economy to worst level since 2009

Brexit plunges UK economy to worst level since 2009

Britain's decision to leave the EU has led to a "dramatic deterioration" in economic activity, not seen since the aftermath of the financial crisis.

Data from IHS Markit's Purchasing Manager's Index, or PMI, showed a fall to 47.7 in July, the lowest level since April in 2009, BBC reported on Friday.

Both manufacturing and service sectors saw a decline in output and orders. However, exports picked up, driven by the weakening of the pound.

The report surveyed more than 650 services companies, from sectors including transport, business services, computing and restaurants.

It is the first significant set of data measuring business reaction to the result of the UK referendum.

A departure from the EU could mean companies based in Britain are cut off from the bloc's single market, which guarantees no tariffs on trade and the free movement of workers and money. The uncertainty over Britain's trade relations, which will take years to renegotiate, is causing companies to hold back investment and hiring or even to make cuts.

The weeks of political uncertainty, with the prime minister resigning after the vote and the main parties in disarray, also hurt confidence.

Chris Williamson, chief economist at IHS Markit, said the downturn has been "most commonly attributed in one way or another to Brexit."

"Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least."

Williamson added that the economy could contract by 0.4% in the third quarter of this year, but that would depend on whether the current slump continued.

"The only other times we have seen this index fall to these low levels, was the global financial crisis in 2008/9, the bursting of the dot com bubble, and the 1998 Asian financial crisis," he said.

"The difference this time is that it is entirely home-grown, which suggest the impact could be greater on the UK economy than before."

 

 

   
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