Services to the rescue as EU vote puts the brakes on economic growth

Britain’s economic growth is set to halve in the second quarter against the first, mainly because of Brexit worries, figures released today show.

The economy looks set to grow by 0.2% in the second quarter, stronger than the outlook a month ago but still a slowdown from 0.4% in the first three months of the year, survey compiler Markit said.

Its service-sector index rose to 53.5 in May from 52.3 in April, which was better than economists had forecast. That helped push up the composite index, which also includes manufacturing and construction, from 51.9 to 52.8. A figure above 50 indicates growth.

“Growth has collapsed in manufacturing and construction, leaving the economy dependent on the service sector to sustain the upturn, though even here the pace of expansion has remained frustratingly weak so far this year,” Markit’s Chris Williamson said.

“An increasing number of firms have cited uncertainty regarding the EU referendum as a factor hurting their business growth in recent months,” he added. “Responses to a special question in May showed some 36% of firms reporting a detrimental impact from Brexit uncertainty, with 8% seeing a strongly detrimental effect.

“It seems reasonable to expect this uncertainty to persist and even intensify in June, subduing economic growth further.”