By Andy Bruce
LONDON (Reuters) – Coronavirus hit Britain’s economy in April with more force than even the most pessimistic forecasters had feared as businesses reported an historic collapse in demand during a nationwide lockdown, a survey showed on Thursday.
The IHS Markit/CIPS Flash UK Composite Purchasing Managers’ Index (PMI) fell to a new record low of 12.9 from 36.0 in March – not even close to the weakest forecast in a Reuters poll of economists that had pointed to a reading of 31.4.
The scale of the collapse all but guarantees a huge contraction in the world’s fifth-largest economy and will add to doubts about whether financial help from the government has reached businesses quickly enough.
“The dire survey readings will inevitably raise questions about the cost of the lockdown, and how long current containment measures will last,” Chris Williamson, chief business economist at IHS Markit, said.
Williamson said the figures on the face of it pointed to a 7% quarter-on-quarter contraction in the economy, although he cautioned that this was likely to be an understatement as its survey does not cover retailers or most self-employed people.
A Reuters poll of economists on Thursday pointed to a roughly 13% contraction in economic output in the current quarter, which would be the largest since records began after the World War Two.
Data company IHS Markit said 81% of British services companies and 75% of manufacturers reported a fall in business activity.
Only some medical and food and drink manufacturers reported growth in April, and a handful of services companies linked to online retail and the public sector.
Employment in British companies fell at the fastest pace since PMI records started in the 1990s, although in some cases this reflected use of the government’s furlough scheme, data company IHS Markit said.
Government budget forecasters last week said unemployment could rise as high as 10% with an extra 2 million people losing their jobs if a three-month lockdown was only slowly lifted over the next three months.
Companies slashed prices at a record pace to prop up demand, the survey showed.
The PMI for the services sector, which accounts for about 80% of Britain’s private sector economy, fell to 12.3 from 34.5, another record low.
A slight improvement in optimism was the only bright spot for services companies.
Manufacturers fared little better as output and new orders crashed.
As in earlier months, a lengthening of supplier delivery times – in normal times is a sign of healthy demand – greatly flattered the headline PMI for manufacturers, although it still fell to a record low of 32.9, from 47.8 previously.
(Reporting by Andy Bruce; Editing by Hugh Lawson)
