Double-dip recession on cards for UK economy after private sector slump

A double-dip recession looks even more likely after the UK’s private sector saw activity slump this month due to the latest round of lockdowns.

January’s PMI report revealed a sharp downturn in the services sector after hospitality firms and non-essential retailers were forced to shut their doors to customers.

The closely monitored IHS Markit/Cips Flash UK Composite PMI report shows a reading of 40.6 so far in January, where anything below 50 denotes a decline in activity.

Chris Williamson, chief business economist at IHS Markit, said: “A steep slump in business activity in January puts the locked down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards.”

Official figures last week showed that output tumbled in November amid lockdowns and restrictions on both sides of the Border.

The Office for National Statistics (ONS) said UK gross domestic product (GDP) fell by 2.6 per cent month-on-month in November. The decline came after six consecutive months of growth.

Economists had warned that the UK is set to see a double-dip recession if restrictions remain in place in the first three months of 2021.

January’s PMI report revealed a sharp downturn in the services sector after hospitality firms and non-essential retailers were forced to shut their doors to customers.

Meanwhile, the recovery in the manufacturing sector slowed down to only marginal growth amid weaker export orders.

Williamson added: “Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of Covid-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.

“Worryingly, January also saw companies reduce headcounts at an increased rate again.”

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