By William Schomberg
LONDON, Feb 3 (Reuters) – Britain’s services sector kicked off 2023 with its weakest performance in two years hit by cutbacks to business and consumer spending, according to a survey published on Friday that echoed the Bank of England’s recession warnings.
But there were signs of an improvement for some firms.
The final version of the S&P/CIPS UK Services Purchasing Managers’ Index (PMI) fell to 48.7 in January, down from 49.9 in December, touching its lowest level since January 2021 when Britain was under a tough coronavirus lockdown.
However, the reading was less weak than the preliminary estimate for January of 48.0.
“The latest survey illustrates that the UK economy risks falling into recession as labour shortages, industrial disputes and higher interest rates take their toll,” Tim Moore, economics director at S&P Global Market Intelligence, said.
But the downturn was relatively shallow and new order volumes moved closer to stabilisation while export sales grew, helping to push up employment.
The overall rate of cost inflation eased to its lowest since August 2021 as reduced fuel prices offered some relief and business activity expectations for the year ahead were the strongest reported since April 2022.
The composite PMI, which combines the services survey with Tuesday’s manufacturing PMI, slipped back to 48.5 in January from 49.0 in December.
The BoE warned on Thursday of a recession lasting five quarters starting in early 2023 although its forecast for the downturn was less severe than its projection in November.
The British central bank also toned down its guidance about the need for future interest rate increases, saying it would respond to inflation pressures – especially among services firms – that were more persistent than expected.
