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Coronavirus: Services sector sees its steepest downturn since 1996

Britain’s services and manufacturing firms are falling deeper into an economic slump, according to a closely-watched survey.

The IHS Markit/CIPS purchasing managers’ index (PMI) for March shows that both sectors shrank as the worsening coronavirus pandemic brought restrictions to the UK.

The services sector saw its steepest downturn in activity since records began in July 1996, almost entirely due to the closure of non-essential businesses and the cancellation of orders.

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The index posted 34.5 in March, down from 53.2 in February. A number below 50 indicates a contraction.

Data for the survey was taken between 12 and 27 March, covering the period after Prime Minister Boris Johnson ordered the shutdown.


People were told to stay home unless they were exercising, shopping for essentials or doing essential work that could not be done from home.

Non-essential businesses, including bars, restaurants and gyms were told to close.

The services sector – which covers a range of businesses from law firms and accountants to travel agents and restaurants – represents 80% of UK economic output.

The data also showed:

New business from abroad fell sharply during March, reflecting international travel restrictions and widespread business closures across EuropeEmployment numbers fell for the first time in five months and at the fastest rate since June 2009Average cost burdens increased at the slowest pace for just over four years, helped by falling fuel prices and efforts to reduce non-essential expenditureBusiness expectations for the next 12 months dropped to the lowest in more than 20 years of data collectionThe data was worse than the ‘flash’ data, which was published by IHS Markit on 24 March, based on around three-quarters to four-fifths of monthly responses

The final composite Purchasing Managers’ Index covering services and manufacturing fell to 36.0, down from 53.0 in February.

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Tim Moore, economics director at IHS Markit, said: “There were numerous reports from survey respondents that placing staff on furlough had helped to mitigate more widespread job losses in March.

“However, employment levels across the service sector still dropped at the fastest pace for more than a decade, reflecting some forced redundancies and the non-replacement of departing staff amid widespread hiring freezes.”

The government announced last month that it would pay 80% of the wages of workers who were temporarily laid off by companies during the pandemic.

The only bright side of the data was a rise in business activity from technology services, possibly due to the increase in the number of people working from home.

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Elsewhere in Europe

Italy’s service sector shrank at the fastest rate in more than 22 years in March – diving to 17.4 compared with 52.1 in FebruaryGermany’s services PMI fell to 31.7 in March, from 52.5 in FebruaryFrance’s service sector activity was at 27.4 from February’s 52.5, the fastest rate on recordEuro zone business activity hit a record low of 29.7 from February’s 51.6

Economists expect Britain’s GDP to plunge by 10% in the second financial quarter but there is hope that the economy will recover quickly once the coronavirus outbreak begins to fade.


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