UK Economy Growth Halted as Services Sector Slows Down
Uncertainty about EU membership and a lack of investment to the services industry is taking its toll on the UK economy
The UK economy is experiencing halted growth due to the services sector slowing down, according to a report out this week by BDO LLP.
The survey shows that the service sector’s “stagnant” growth is affecting the confidence of UK businesses, with business optimism at its lowest in more than two years.
BDO’s Output Index – which reflects companies’ experience of orders for the coming three months – has dropped from 101.7 in February to 101.3 in March this year. While BDO’s Optimism Index – which predicts growth six months ahead – has fallen to 99.4.
BDO has reported that a lack of investment due to uncertainty of the UK’s EU membership has been a factor in the decline, with firms opting to delay spending until after the EU Brexit referendum on June 23.
The outlook is even worse for the manufacturing sector with the optimism sub-index now standing at 87.1, implying that manufacturing firms’ order books will decline sharply in the next six months.
Peter Hemington, partner at BDO LLP, said of the findings:
“The UK’s slowing economy is in need of additional support to protect its growth. Recently both the IMF and the OECD have warned of the dangers of too much austerity in the UK.
“The government can currently borrow at rates never seen before. It is in a prime position to safeguard economic growth by investing in our public infrastructure. Expansion in our road, house and rail building programme could reignite UK manufacturing and our steel industry would be a prime beneficiary.”