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UK business malaise deepened before Dec 12 polls

London

BRITISH businesses endured their worst downturn since mid-2016 in the run-up to Prime Minister Boris Johnson's landslide victory in a national election last week, a survey showed on Monday.

The "flash" early reading of the IHS Markit/CIPS UK Purchasing Managers' Indexes (PMI) for Britain showed on Monday that the decline in both the services and manufacturing sectors has accelerated unexpectedly in December.

The readings suggested that the world's fifth-biggest economy is on course to contract in the fourth quarter, survey compiler IHS Markit said, although the PMIs have overstated weakness in previous quarters, partly because of higher government spending before Brexit.

This is also only the second month for which IHS Markit has released flash PMIs for Britain, and November's flash estimates were revised up significantly when final data came out.

Addressing a wilting economy is likely to be among the first items in Mr Johnson's in tray as he builds his new government, bolstered by a majority of 80 seats in Parliament.

"Any positive aspects of the survey came largely from the sentiment indicators, with future expectations rising to the highest since June as firms hope that the election will bring clarity on the outlook and remove some of the uncertainty that has been holding back demand," said IHS Markit's chief business economist Chris Williamson.

The composite PMI, which combines the services business activity and services and manufacturing output readings, fell to 48.5 from 49.3, its lowest level since July 2016, just after the Brexit vote. Readings below 50 denote contraction.

The PMI for the dominant services sector fell to 49.0 in December from 49.3 in November, its lowest level since July 2016. A Reuters poll of economists had pointed to an improved reading of 49.5.

The manufacturing PMI dropped to 47.4 from 48.9 - again weaker than forecast - as a stockpiling drive before the aborted Oct 31 Brexit deadline evaporated. The survey's gauge of factory output fell to its lowest level since July 2012. REUTERS