The UK economy is set to shrink at an unprecedented rate after business activity this month dived at the fastest pace on record due to widespread shutdowns caused by the coronavirus pandemic, according to new figures.
The closely watched IHS Markit/CIPS Flash UK composite purchasing managers’ index (PMI) plunged to a reading of 12.9 for April, from 36 last month.
Manufacturing and services activity sank at a rate which exceeded the downturn seen at the height of the global financial crisis “by a wide margin”, the survey said.
It revealed that 81% of services companies reported a fall in business during the fortnight from April 7 to April 21, while 75% of manufacturing firms saw a decline.
Chris Williamson, chief business economist at IHS Markit, which compiled the data, said the slump indicates the reading is consistent “with GDP falling at a quarterly rate of approximately 7%”.
He added: “The actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector, which have been especially hard-hit by the Covid-19 containment measures.
Flash UK #PMI plummets to a record low of 12.9 in April (36.0 in March), as #COVID-19 measures and widespread business shutdowns hit the private sector. Record declines were reported in both manufacturing and service sector output.— IHS Markit PMIâ¢ (@IHSMarkitPMI) April 23, 2020
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“Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis, confirming fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus.”
Duncan Brock, group director at CIPS, said: “Though this significant and further deterioration from last month’s results came as no great surprise, it is no less devastating.
“Manufacturing output sometimes shrank into almost nothing as the pandemic’s grip took hold and factory closedowns at home and abroad made regular production schedules impossible.
“The overall services fall in output was faster than manufacturing and the steepest since records began in 1996 as social distancing measures enforced for the population stopped everything in its tracks and an eerie silence descended over the UK’s streets.”
James Smith, developed market economist at ING economics, said: “There’s little doubt these are shocking figures, but the reality is they don’t tell us an awful lot that we didn’t already know.
“As lockdowns are unwound gradually over the next couple of months, we might see the PMIs begin to rebound as more firms report ‘higher’ output.
“But the reality is that the underlying economic recovery is going to be much more gradual.”