The UK’s services sector grew at its slowest pace for seven months in October as uncertainty over Brexit undermined business activity.
Suggesting the UK economy is entering a period of tepid growth following a stronger performance over the warm summer months, IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) said Brexit-related uncertainty and concerns about the global economic outlook had constrained growth.
The latest health check for the sector, which includes hotels, restaurants, transport and finance, showed a more cautious spending pattern among businesses, highlighted by the weakest upturn in new work for services companies since straight after the Brexit vote in 2016.
The monthly purchasing managers’ index from IHS Markit/CIPS fell to 52.2 last month from 53.9 in September, its weakest since March on a scale where a reading of 50 separates expansion from contraction in economic growth.
Services account for almost four-fifths of the UK’s gross domestic product, indicating that GDP growth could be weaker in October than during the summer, when the warm weather and the World Cup encouraged an upturn in consumer spending.
Consumer-facing sectors such as hotels, restaurants and leisure reported the weakest performance in October, while a number of companies suggested Brexit uncertainties and worries about the global economy were having an impact.
Duncan Brock, group director at CIPS, said: “Many of the respondents attributed this poor performance and the biggest softening in new order growth since July 2016 to continuing ambiguity around the Brexit negotiations.”
New car sales also suffered another disappointing month in October, as the number of vehicle registrations dropped for the seventh consecutive month, falling by 2.9% over the year to stand at 153,599 units.
Fuelled by a 21% drop in diesel registrations, the figures come after car sales plunged by a fifth in September, which is usually a bumper month for the motor trade. Waning appetite for diesel cars amid changes to government policy, as well as weak consumer confidence, weighed on demand.
The slowdown in the services industry last month followed disappointing news from the manufacturing sector, which accounts for about a tenth of GDP. Britain’s factories recorded a sharp slowdown in output in October, as new orders declined for first time since mid-2016.
Chris Sood-Nicholls, the head of global services at Lloyds Bank, said: “With autumn upon us, consumers are tightening their belts. And with the prospect of any greater certainty seemingly as distant as ever, businesses across the disparate services sector are struggling to maintain their confident outlook.”