Referendum Uncertainty Slowdown U.K. Economy

The U.K. economy face period of uncertainties as gauge of services fell to its lowest level in more than three years in April. Companies within the economy are feeling the strain and wary of the possible outcome of the June 23 referendum, hence, the reason why output has dropped in both manufacturing and construction sectors as the majority of companies are waiting for the outcome before making long-term commitments.

Data for service purchasing manager index dropped from 53.7 to 52.3, while that is above the 50 level that marked expansion from contraction, it is the weakest since 2013 and came short of 53.5 median forecast by economists.

This follows a slump in manufacturing and construction data released by Markit Economics, the data showed growth of just 0.1 percent in April.

With the series of disappointing data, economists across the country have been slashing their forecasts for the second quarter, even Barclays forecasted no growth at all.

Alan Clarke, an economist at Scotiabank said “the data were showing that pre-election jitters are hurting business sentiment”.

But David Noble, the chief executive at Chartered Institute of Procurement & Supply, said while the referendum had a “profound effect” on the sector, there are other problems impeding growths.

“The slowdown in the service sector follows similar weakness in manufacturing and construction to make a triple-whammy of disappointing news on the health of the economy at the start of the second quarter [of the year],” said Chris Williamson, a chief economist at Markit.

“The PMI surveys are collectively indicating a near-stalling of economic growth, down from 0.4% in the first quarter to just 0.1% in April,” he said.