UK could be heading for double-dip recession

Activity in the UK’s private sector contracted in November as the national lockdown in England ended four months of expansion, according to early data.

The IHS Markit/CIPS Flash UK Composite PMI is down to 47.4 so far in November — the first time the index has gone below 50 since June. Any score under 50 represents a decline in activity.

This early “flash” reading of the index compares to a level of 52.1 in October.

The downturn was driven by the fastest reduction in service sector output since May as pubs, restaurants and other leisure and hospitality businesses closed under new Covid-19 lockdown measures.

Manufacturing was largely unaffected by the lockdown and this is reflected in the manufacturing PMI, which rose to 55.2, up from 53.7 in October and the highest since August.

Stockpiling the before end of the Brexit transition period on 31 December 2020 contributed to the boost in manufacturing.

Chris Williamson, chief business economist at IHS Markit, warned that the November survey data points to a double-dip recession, with the latest lockdown measures causing business activity to collapse across much of the economy.

He added: “Some comfort comes from the data suggesting that the impact of the lockdown has not been as severe as in the spring, and manufacturing has also received a significant boost from inventory building and a surge in exports ahead of the UK’s departure from the EU at the end of the year, providing a fillip for many companies.

“However, while the lockdown will be temporary, so too will this pre-Brexit boost.”