Election stalls growth but UK still beats rivals

Britain’s economic growth has slowed this month as firms hold off making big decisions until after the election, a closely watched business survey has found.

But despite activity falling to a seven-month low, the UK’s private sector output was ahead of European rivals.

According to the S&P Global survey, the UK’s score fell from 53 in May to 51.7 last month. A reading above 50 represents growth.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘Flash PMI survey data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1 per cent.

‘The slowdown in part reflects uncertainty around the business environment in the lead up to the General Election, with many firms seeking a hiatus in decision-making pending clarity on various policies.’ It comes after Britain’s economy bounced back at the start of this year following a recession at the end of 2023.

Go slow: The latest PMI reading showed a June slowdown, led by a fall in the services sector reading to 51.2 from 52.9

The economy grew by what was described as a ‘gangbusters’ pace of 0.6 per cent in the first quarter of 2024.

And the Bank of England this week upgraded its outlook for the second quarter from 0.2 per cent to 0.5 per cent. Prospects have been boosted by a fall in inflation to 2 per cent and the likelihood of a coming interest rate cut.

Yesterday’s PMI reading, however, showed a June slowdown, led by a fall in the services sector reading to 51.2 from 52.9.

The smaller manufacturing sector figure edged up to a two-year high of 51.4. Analysts said they expected a bounce-back next month.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: ‘The PMI fall is an election-related blip, the UK is growing fine’.

Across the eurozone, the PMI reading fell to a three-month low of 50.8 in June compared with 52.5 in May.

That reflected a sharp drop in German manufacturing activity and slowdown in France, which posted a decrease in output for the second month running to 48.2. Germany’s economic activity slowed to 50.6.

Bert Colijn, from ING, said the Eurozone PMI reading was a ‘reality check’ showing the bloc’s economic recovery is ‘no Cinderella story’.

‘With euro risk making a return around the French elections and higher rates still seeping into the economy, this is no time to be complacent,’ he said.

‘The eurozone economy is performing better than in 2023, but headwinds do remain.’

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