Sharp slowdown in UK business activity rings recession alarm

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Momentum in Britain's private sector slowed much more than expected this month, adding to recession worries as inflation pressures ratcheted higher, according to a business survey on Tuesday that showed rising pessimism.

S&P Global's flash Composite Purchasing Managers' Index , a monthly gauge of the services and manufacturing industries, fell to 51.8 in May from 57.6 in April, its lowest level since February last year.

"The collapse in the composite PMI in May is the clearest sign yet that demand is faltering in response to the intense squeeze on households' real disposable incomes," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. Financial markets still expect the BoE to double interest rates to at least 2% by the end of the year from 1% now.

"Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China's lockdowns and the war in Ukraine," Williamson said.

 

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