After vote, UK economy shrinking at fastest pace since ’09

LONDON (AP) — Britain’s economy is contracting at its steepest pace since early 2009 as a result of the vote to leave the European Union, according to a survey published Friday.

The so-called purchasing managers’ survey — a gauge of business activity conducted by IHS Markit — shows its composite output index fell to 47.7 points in July from 52.4 in June, an 87-month low. The survey is one of the first indicators of the country’s economic health following the vote as the data was collected July 12-21.

“July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009,” said Chris Williamson, chief economist at Markit. “The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit.'”

The pound fell on the news, to $1.3170 from $1.3280 before the release.

Both business output and new orders fell for the first time since the end of 2012. They dropped since June at the steepest pace in the survey’s history, Markit said.

The measure of service providers’ optimism about the coming 12 months slumped to a seven-and-a-half year low. Manufacturers reported job cuts.

The report noted there wasn’t an uptick in costs, which some are fearing as the plunge in the pound since the vote should make fuel, raw materials and imports more expensive. They were offset in part by subdued wage inflation.

Michael Hewson, analyst at CMC Markets, said the survey findings were worse than expected.

“The big and important question now is whether this slowdown heralds a more permanent economic condition, or whether in the final days of July, we get a pickup in activity now that we have a more stable political environment and the Brexit fog has started to clear a little.”