Britain's Economy Stagnates Amid Tax Hikes and Trade War

Strategic Insights -

Britain's economy is showing signs of stagnation, with growth predicted to slow to just 0.1pc in the second quarter. The country's businesses are feeling the pinch from tax hikes and a global trade war, with firms axing jobs and sentiment stuck in the doldrums. A closely-watched purchasing managers' index (PMI) survey showed that business activity has picked up slightly in June, but the services sector was on the up while manufacturers' order books shrank again. Private sector employment fell for the ninth month in a row, and consumer sentiment is worsening amid growing fears over jobs and a squeeze on living costs.

Key Takeaways:

  • The purchasing managers' index (PMI) for June showed a reading of 50.7, an improvement on May's 50.3 but only just above the 50-mark that separates growth from contraction.
  • Business confidence remains in the doldrums compared to this time last year, attributed to the impact of US tariffs, rising geopolitical uncertainty, and intense price competition in major global markets.
  • Private sector employment fell for the ninth month in a row and at a faster pace than in May.
  • Consumer sentiment is worsening due to fears over jobs and a squeeze on living costs, resulting in an increased appetite for household borrowing.
  • Pessimism among UK households shows no signs of improving, with consumer sentiment remaining firmly in negative territory due to concerns about making ends meet.
  • The economy is showing signs of stagnation, with growth predicted to slow to just 0.1pc in the second quarter.
  • Labour's claim to have fixed the foundations of the economy after a decent start to the year with growth of 0.7pc in the first quarter is proving premature.
  • The 'flash' PMI survey for June suggested that Government policies, fears of global trade protectionism, and rising tensions in the Middle East all have an effect on businesses.

Statistics:

  • 0.1pc: Growth predicted to slow in the second quarter
  • 50.7: The 'flash' PMI survey reading for June
  • 50.3: The PMI survey reading for May
  • 50: The mark that separates growth from contraction
  • 9th month: Private sector employment has fallen in a row
  • 3.4pc: Inflation has remained stuck at
  • £25 billion: The amount of National Insurance raid on employers

Sources:

  • A closely-watched purchasing managers' index (PMI) survey
  • A separate monthly S&P Global survey
  • S&P Global Market Intelligence
  • Maryam Baluch, economist at S&P Global Market Intelligence
  • Chris Williamson, chief business economist at S&P Global market intelligence