Dramatic decline in business output post-Brexit with London hardest hit
Business activity across the country has suffered a significant contraction since June’s EU referendum with London businesses the hardest hit, according to Lloyds Bank’s latest Purchasing Managers’ Index.
In the first such decline in over three-and-a-half-years, overall UK productivity dropped from 52.5 in June to 47.4 last month, its lowest level since April 2009, with readings below 50 signifying a contraction according to the banking group.
London posted the biggest contraction of all the regions with a reading of 44.4 followed closely by the South East (45.5) and the North East (46.0) with cost pressures borne from a weaker sterling putting pressure on firms.
The monthly survey is considered the leading barometer of economic health in the UK’s regions, and takes into account responses from manufacturing and service sector businesses in the manufacturing about the value of goods and services.
Tim Hinton, Managing Director, Mid-Markets and SME Banking at Lloyds Banking Group said the bank had ‘expected’ a downturn this month as uncertainty surrounding the EU referendum becomes more entrenched.
He said: “As expected, business activity has slowed on the back of the EU Referendum result. Whilst the impact has been felt across the UK, companies in the South East and London were hit particularly hard, with PMI at the lowest point since 2009 and output contracting for the first time since 2012.
“While a weaker pound is benefiting UK exporters, it has also increased costs for businesses, putting pressure on inflation.
“UK firms will likely face challenges in the short-term but the Bank of England’s decision to cut interest rates could help crystallise important investment decisions and in turn support the economy.”
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