UK companies brace for recession as manufacturing slumps

BRITISH businesses are bracing for a worsening recession after both manufacturing and service sectors slumped in the fourth quarter, prompting the first fall in employment in almost two years.

S&P Global said its measure of sentiment from purchasing managers was little changed at 49 in December, indicating a contraction across the economy. That compared with last month’s reading of 48.2 and expectations for a drop to 48.

“Businesses are battening down the hatches, most notably by reducing headcounts in a sign that the downturn not only has further to run but could yet accelerate,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “For now, the downturn looks to be relatively mild.”

The figures add to evidence of the toll being taken by higher inflation and interest rates. S&P said its index tracking employment dropped for the first time since early 2021 when a pandemic lockdown was in place.

Manufacturers are suffering the most, with the sharpest drop in activity in 31 months. Export orders declined for a sixth consecutive month, and producers reported a shortage of new work.

S&P said executives are turning more cautious in the face of lower demand from clients. While business confidence improved to its highest level in four months, it remained subdued by historical standards.

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The figures, according to S&P, suggest the economy shrank 0.3% in the fourth quarter following a 0.2% contraction in the third. That would meet the technical definition for a recession, with two quarters of declining output. BLOOMBERG