Manufacturing and services activity in the UK has contracted at its fastest pace on record, as a large portion of the economy has been shut down due to the coronavirus pandemic.
The latest IHS Markit/CIPS flash composite purchasing managers’ index for the UK signalled by far the fastest decline in business activity since comparable figures were first compiled over two decades ago, with a reading dropping to 12.9 in April from 36 in March.
The composite index is an average of manufacturing and services activity. A reading below 50 indicates a majority of businesses reporting a deterioration.
Economists at Markit said that the reading is consistent with a quarterly fall in GDP of 7 per cent, but that the actual decline could be even greater, partially because the PMI excludes the vast majority of the self-employed and the retail sector, which have both been especially hard-hit by the Covid-19 containment measures.
“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 quarters” said Chris Williamson, chief business economist at IHS Markit.
Services, which account for about 80 per cent of the UK economy, were the largest drag on activity with the corresponding index falling to 12.3 from 34.5 in the previous month, also the lowest since record began in 1996.
The manufacturing PMI index dropped less severely to 32.9 in April, but the output component of the index fell to 16.6, which is also a record low.
Around 81 per cent of UK service providers and 75 per cent of manufacturing companies reported a fall in business activity during April, which was overwhelming attributed to the pandemic.
Flash estimates are published one week before the final results and are based on about 85 per cent of the typical responses. The survey was compiled between April 7 and April 21, and the response rate from members of the survey panel was not affected by shutdowns.
The UK results mirror those of the eurozone, where activity also dropped to the lowest on record.
The UK has been in lockdown since March 20, later than most European peers and unlike many other countries has not yet announced a path towards the relaxation of its social distancing measures.