Sluggish services kill rate hike and leave Brexit Britain sickly

Brexit Britain is barely recovering from its weakest growth for five years, alarming figures on the biggest slice of the UK economy revealed on Thursday.

The latest disappointment from the nation’s services companies, accounting for 80% of overall growth, leaves the UK growing at a pace of just 0.2%, according to the Chartered Institute of Procurement & Supply.

It warned the sector remained “in the slow lane” in April. The verdict comes after official growth estimates put first-quarter growth at 0.1%, the weakest since 2012.

The Cips services snapshot, where a score over 50 signals growth, made a weaker-than-expected recovery from March’s snow-hit 51.7 to 52.8, still the poorest since September 2016 discounting the blizzards of the previous month.

Cautious corporate clients drove one of the worst months for new business wins since the EU referendum as the economy’s soft patch intensified. Firms are also struggling to find staff.

The gloomy outturn decisively buries any chance of a rate hike from the Bank of England next week, while further weakness could even raise doubts over November’s hike, according to survey compiler IHS Markit.

Combined with soft manufacturing and construction data, chief economist Chris Williamson said GDP was expanding at a rate of 0.2% at the beginning of the second quarter.

He said: “The disappointing services data will add to expectations that the MPC will take its finger firmly off the rate-hike trigger.

“Any further slowing will also raise questions as to whether the November rate hike may have been ill timed.”

Cips director Duncan Brock warned households were “continuing to rein back spending” as consumer-facing businesses like restaurants and hotels faced the brunt of the slowdown.