The UK’s economic slowdown deepened in October, with private sector growth slowing to its lowest level in 21 months, new figures show.
Output fell for the third consecutive month after a period of political turmoil that rattled financial markets.
The influential S&P Global/CIPS flash UK Composite Purchasing Managers’ Index (PMI) posted a reading of 47.2 in October, below September’s reading of 49.1.
It also fell below the market consensus of 48.0, although analysts at Pantheon Economics predicted a more accurate PMI of 47.0 reflecting political and economic uncertainty weighing on private sector companies.
Gross domestic product set to fall in Q4 after likely contraction in Q3, meaning UK is in recession
Any score below 50 is considered a contraction in the economy, while any score above is considered growth.
The index showed there was a sharp drop in production in October as manufacturers continued to face supply shortages and a slowdown in demand.
Meanwhile, business activity in the service sector, which includes hospitality like restaurants and pubs, fell for the first time in 20 months and at the fastest rate since January 2021.
The survey polled thousands of businesses on their transactions every month and is closely watched around the world.
Tight household budgets, recession fears and delays in business investment decisions due to political uncertainty were all cited as factors that led to lower output this month.
CIPS said the drop was “not a big surprise” given companies are worried about politics, rising interest rates and historically high costs.
As a result, optimism levels among manufacturers and in the service sector have fallen to a two-and-a-half-year low.
Chris Williamson, chief economist at S&P Global Market Intelligence, said outside of the Covid shutdowns, the index was the lowest since March 2009.
He said: “October PMI flash data showed the pace of economic decline accelerating after recent political and financial turmoil.
“Increased political and economic uncertainty has led to a drop in business activity at a rate not seen since the global financial crisis of 2009, excluding the months of lockdown linked to the pandemic.
“Gross Domestic Product (GDP) is therefore expected to fall in Q4 after a likely contraction in Q3, meaning the UK is in recession.
“Business confidence has meanwhile slumped, slipping to a level not seen before in 25 years of surveying, meaning businesses are increasingly nervous about the outlook.”
Staff hiring was hailed as a relatively “bright spot” in October as employment figures were boosted by post-pandemic business stimulus plans.
Nevertheless, the rate of job creation in the private sector was the slowest in 20 months, the survey found.