On Tuesday, a business survey reveals that Britain’s economy is on course for an unprecedented 7% quarterly contraction. It came after when business closures were forced across the country last month. It was part of measures to slow the spread of the coronavirus.
IHS Markit said its monthly Purchasing Managers’ Index (PMI) for the services sector dropped to 13.4 in April. It was 34.5 in March. It fell to its lowest since the survey started in 1996. It was only a fraction better than an initial flash estimate of 12.3.
Manufacturing PMI for last week was similarly dire. Taken it together, IHS Markit pointed to the deepest economic downturn ‘in living memory’. A composite PMI of the two sectors dropped to 13.8 in April. It was 36.0 in March. It was far below the 50 mark that divides growth from contraction.
IHS Markit economist Tim Moore said that the April survey reading is consistent with the economy falling at a quarterly rate of approximately 7%. However, they expect the actual decline in GDP could be even greater.
Britain’s services PMI, does not include retailers or many of the self-employed. They have been hardest hit by store closures since the March 23 lockdown. As per the estimations of some of Britain’s biggest companies, once lockdown measures start to lifts, their sales would be down by more than a fifth over the year. That would be the case even with a modest recovery.
This week, Britain’s government will review the lockdown. However, so far ministers have said it is too soon to relax restrictions significantly.
In the services PMI, few of the businesses reported doing well. It includes those supporting government contracts, online shopping, or financial services. The services PMI showed a small rise in business expectations. It was 53.2 in April from a record-low 47.9 in March. IHS Markit stated that it reflected firms’ hopes that they would be allowed to reopen by the summer.
The government is currently under discussions with company managers and trade unions. Discussions are focussed on how to allow more businesses to operate safely. Under current guidelines, some stores are allowed to open. It includes supermarkets. They have been asked to limit the number of customers allowed in at once. They have also urged staff and shoppers to stay 2 meters apart.