Brexit worries slow UK economy to near standstill

Growth in Britain’s economy slowed to a crawl at the end of 2018, according to a survey that, three months before Brexit, showed optimism among services companies have sunk to levels typical of the global financial crisis.

Friday’s IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) rose slightly more than forecast by economists polled by Reuters, to 51.2 in December from 50.4 in November.

But the increase was one of the slowest since the Brexit referendum in 2016 and firms were increasingly anxious about the year ahead.

Britain’s economy looks on track for quarterly growth of around 0.1 percent during the fourth quarter, data company IHS Markit said, a far cry from the post-financial crisis average of 0.5 percent.

November and December marked the weakest two months for morale among services firms since March 2009, around the low point of Britain’s last recession, the PMI showed.

Brexit uncertainty was by far the most widely cited factor by companies for the decline in expectations, which dipped to 60.2 from 60.6 in November, IHS Markit said.

Britain is due to leave the European Union on March 29 but what will actually happen on that day remains far from clear.

The future of Prime Minister Theresa May’s deal struck with the EU hangs in the balance before it is put to a parliamentary vote, and calls for a second referendum — which she has consistently rejected — are growing.

“(Clarity) on Brexit is needed urgently in order to prevent the economy sliding into contraction,” IHS Markit’s chief economist Chris Williamson said.

Employment among services firms — a strong point of Britain’s economy over the last five years — increased in December at the weakest rate since just after the referendum, the PMI showed.

IHS Markit said an easing of cost pressures, after a fall in the price of crude oil, was one of the few plus points for British services companies in late 2018.

Services account for about 80 percent of British economic output.

The composite PMI for December, combining the manufacturing, construction and service sectors, rose to 51.6 from 51.0 in November, with some of the rise reflecting a rush by factories to stockpile ahead of Brexit.

Another major business survey from the British Chambers of Commerce on Thursday painted a similarly subdued picture.

Gross domestic product figures for November are due on Jan. 11.