Britain ‘will be in recession by end of the year’: Business activity falls at the fastest rate in almost two years
Recession fears are mounting across Britain and the eurozone after business activity fell at the fastest rate in almost two years.
In a bleak report underlining the importance of Liz Truss’s focus on growth, S&P Global said output across the UK services and manufacturing sectors declined at the fastest pace since January 2021.
The closely-watched purchasing managers’ index (PMI) of activity pulled in at 49.1 in September – down from 49.6 in August and below the crucial 50 mark, which indicates no change for a second month running.
Gloom forecast: In a bleak report S&P Global said output across the UK services and manufacturing sectors declined at the fastest pace since January 2021
This was mirrored in the eurozone, which notched up a reading of 48.1, marking a third straight month of contraction.
Activity in Germany, the eurozone’s largest economy, was particularly weak, recording its fastest decline since the first Covid lockdown in 2020.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity.
‘Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated.’
Capital Economics is expecting the eurozone and Britain to be in recession by the end of the year.
Business confidence across the 19 countries which use the euro sank to its lowest level since the initial Covid outbreak. In the UK, businesses trimmed growth expectations to the lowest levels in almost two-and-a-half years.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said Britain was ‘drifting towards recession’.
Tim Moore, economics director at S&P, said the energy crisis ‘continued to hit business and consumer spending’ amid ‘severe pressure on budgets in the wake of rising inflation, alongside deepening worries about the economic outlook’.
The malaise presents a headache for the Bank of England and European Central Bank as they raise interest rates in a bid to bring sky-high inflation under control.
But it is feared that higher rates will plunge the economy into recession as borrowing costs for households and businesses soar.
Inflation is 9.9 per cent in the UK and at a record high of 10 per cent in the eurozone. In Germany, it is at a 70-year high of 10.9 per cent.
In her speech to the Tory party conference yesterday, the new Prime Minister vowed to defeat the ‘enemies of enterprise’ holding Britain back.
Reaffirming her focus on ‘growth, growth, growth’, Truss told delegates: ‘I’m determined to get Britain moving, to get us through the tempest, and to put us on a stronger footing as a nation.’