June 14, 2024


Delighting finance buffs

Coronavirus effect: UK firms fall deeper into record-breaking slump, shows survey

A record-breaking slump among Britain’s services and manufacturing firms deepened in late March with much of the economy in a shutdown to slow the spread of coronavirus, a survey showed on Friday.

The final composite Purchasing Managers’ Index covering the two sectors fell to 36.0 from a preliminary flash reading of 37.1 and 53.0 in February, data firm IHS Markit and the Chartered Institute of Procurement and Supply said.

Britain’s dominant services industry suffered its biggest slump by far since the survey began in 1996, and its index sank to 34.5 from February’s 53.2, weaker than the flash reading of 35.7.

The survey data were collected March 12-27, covering the period after Prime Minister Boris Johnson ordered the closure of bars, restaurants, gyms and other services businesses to slow the coronavirus outbreak on March 20.

“There were numerous reports from survey respondents that placing staff on furlough had helped to mitigate more widespread job losses in March,” Tim Moore, economics director at IHS Markit, said.

With policymakers around the world scrambling to cushion their economies from the coronavirus shock, Britain’s government offered to pay 80 per cent of the wages of workers who are temporarily laid off by companies.

“However, employment levels across the service sector still dropped at the fastest pace for more than a decade, reflecting some forced redundancies and the non-replacement of departing staff amid widespread hiring freezes,” Moore said.

The survey showed the biggest drop in new work among services firms and the bleakest business expectations in more than 20 years of data collection.

Technology services were the only area to signal a rise in business activity — possibly reflecting the stay-at-home order for many people — but new workloads for tech firms dropped more quickly in this category than at any time since 2011.

A final PMI for Britain’s manufacturing sector, published on Wednesday, showed factory output shrank at the fastest pace since the eurozone debt crisis in March.

Economists expect a slump of 10 per cent or more in Britain’s economic output in the second quarter, far worse than during the global financial crisis, but say a sharp recovery is possible once the coronavirus outbreak peaks and fades.

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