Economic growth in the UK’s pivotal services sector has slumped to its lowest level for more than two years, new figures show.
The IHS Markit purchasing managers’ index (PMI) fell to 50.4 last month from 52.2 in October, indicating stalled growth.
It is the lowest level since a sharp decline caused by the Brexit referendum in 2016 and raises concern as the sector accounts for 80 per cent of the total UK economy.
A PMI figure above 50 indicates expansion, so the figures for December will be watched closely by economic experts.
The picture was not as gloomy in other sectors, with manufacturing showing a PMI of 53.1 in November, up from 51.1 in October and construction up to 53.4 from 53.2.
These latest figures indicate that service sector growth is the slowest since 2012 and the report says that only a backlog of work for firms stopped it slipping into deficit.
A fall in global demand and continued uncertainty over the outcome of the Brexit process are the main factors behind the slowdown.
IHS Markit chief business economist Chris Williamson said: “The (services sector) survey results suggest that the pace of economic growth has stalled.”
“Unless demand revives, a slide into economic decline at the turn of the year is a distinct possibility.”
He added that there is an ‘urgent need’ to resolve the UK’s Brexit process to prevent slow growth in services from becoming a downturn.
Another senior economist said the figures were ‘the clearest indication yet’ that the economy is being adversely affected by uncertainty over Brexit.
Samuel Tombs, chief economist at Pantheon Macroeconomics, said the Bank of England’s October to December growth forecast of 0.3 per cent was ‘too upbeat’.
He added: “While a small fall in GDP isn’t likely, no one should rule it out at this stage either.”
The figures were described as ‘thoroughly disappointing’ by Ruth Gregory, senior UK economist at Capital Economics.
She said: “Unless there is a particularly strong bounce back in December, GDP growth of 1.3 per cent seems likely for 2018 as a whole.”
If that does happen, it will represent the weakest GDP growth since the financial crisis erupted a decade ago, she added.
As Theresa May’s Brexit deal hangs in the balance, business secretary Greg Clark told Sky News today that it would be ‘crazy’ for the UK to leave the EU with no deal.
Chancellor Philip Hammond also told MPs during a Commons debate on Mrs May’s proposed EU exit deal that the UK could not afford the economic cost of a no deal Brexit.