Uncertainty about scale of slowdown as confidence dips

The latest Lloyds Bank Regional PMI report shows that new business orders fell in July at the fastest rate since the financial crisis in 2009 and job losses are on the increase.

The research, the first Lloyds Bank Regional PMI report since the Brexit vote, said the fall was directly linked to the uncertain economic climate generated by the EU referendum.

The Yorkshire & Humber’s PMI registered at 49.8 in July, down from 54.0 in June, showing a contraction in output for the first time since October 2012.

However, the rate of decline in the region was less steep than the UK average, which registered at 47.5. A reading of above 50 signals growth, while a ready below 50 signals contraction.

The Lloyds Bank Regional PMI, or Purchasing Managers’ Index, is considered one of the leading economic health-checks for UK regions. The index is based on responses from manufacturers and services businesses about the value of goods and services produced during July compared with the previous month.

Greater uncertainty among businesses was also reflected in a further downturn in employment, with the rate of regional job losses accelerating from June.

The weakness of the pound also affected the price of raw materials, contributing to the sharpest rise in company costs in five years.

Leigh Taylor, regional director for SME Banking in Yorkshire at Lloyds Bank Commercial Banking, said: “The latest data signal a gloomy picture for businesses in Yorkshire.

“Activity contracted in July amid the sharpest decline in new orders since March 2009, while jobs were cut at the quickest rate in more than three years. Clearly, the uncertain economic outlook is affecting Yorkshire-based firms.

“We are committed to supporting Yorkshire businesses as they navigate the post-EU Referendum landscape.”

Today’s PMI research follows a raft of gloomy reports that show Britain’s economy is shrinking at its fastest rate since the financial crisis following the vote to leave the EU.

Financial data company Markit said its monthly all-sector Purchasing Managers’ Index chalked up the steepest month-on-month decline on record after big falls in activity at private-sector services, manufacturing and construction firms.

Chris Williamson, Markit’s chief economist, said: “The unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.”

The numbers point to Britain’s economy shrinking by 0.4 per cent in the three months to September, a decline not seen since early 2009 when the Bank of England cut interest rates to 0.5 per cent. Last Thursday the Bank cut rates to a historic low of 0.25 per cent.

Markit said firms “widely reported that the outcome of the EU referendum had weighed on new business”.

The National Institute of Economic and Social Research said it expects the economy to shrink 0.2 per cent between June and September and saw a 50 per cent chance of recession by the end of next year.

It is unclear whether the July research reflects a knee-jerk reaction to the Brexit vote, or the start of a steeper decline. Several other surveys have shown big falls in business and consumer morale.

Fashion chain Next reported a pick up in sales in its second quarter last week and said that so far it has not seen a big impact on demand from the EU vote although the fall in sterling will push up its costs. That could be passed on to consumers through higher prices.