UK economy 'near stalling' as service sector slows

UK economic growth is "near stalling", partly due to uncertainty over the EU referendum, according to a closely-watched survey.

Research firm Markit said its Purchasing Managers' Index (PMI) surveys for April pointed to growth of just 0.1% in the month.

The latest PMI survey

indicated the UK's services sector grew at its slowest pace in three years in April.

The services PMI reading fell to 52.3 from 53.7 in March.

A reading above 50 indicates growth.

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'Triple-whammy'

Earlier this week, similar surveys from Markit suggested manufacturing activity contracted in April for the first time in three years, while construction activity grew at its slowest pace for nearly three years.

Chris Williamson, chief economist at Markit, said the surveys were a "triple-whammy of disappointing news".

"Some of the slowdown may be attributable to the early timing of Easter, though April also saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand linked to global growth jitters and ongoing government spending cuts," he said.

"The deterioration in April pushes the surveys into territory which has in the past seen the Bank of England start to worry about the need to revive growth."

Jobs growth in the services sector was also the slowest since August 2013, reflecting a recent weakening in the labour market as a whole.

Employment in manufacturing contracted in April and official data has shown that the number of people out of work rose for the first time since mid-2015 in the three months to February.

Margins squeezed

David Noble, head of the Chartered Institute of Procurement and Supply (CIPS), which produces the PMI surveys with Markit, said: "The looming EU referendum has had a profound effect on the [service] sector, keeping prices relatively stagnant and delaying new orders.

"At the other end of the supply chain, the National Living Wage has compounded cost increases, resulting in the overall rate of input price inflation hitting a 27-month high.

"Together, these factors have squeezed margins while fewer than half of businesses expect to grow over the next 12 months."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "There is now compelling evidence that heightened uncertainty ahead of June's referendum on EU membership is taking an increasing toll on economic activity.

"A much weakened set of April purchasing managers' surveys for the services, manufacturing and construction surveys follows on from consumer confidence weakening to a 16-month low in April and the CBI reporting lacklustre retail sales"