UK private sector growth slows due to business caution ahead of Budget

Growth in the UK’s private sector has slowed as businesses and customers braced for the Budget, according to new figures.

The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 50.5 in November, slipping from 52.2 in October.

The flash figures are based on preliminary data. Any score above 50.0 indicates that activity is growing while any score below means it is contracting.

Nevertheless, they were weaker than widely expected, with economists having predicted a reading of 51.8 for the month.

Experts said the data indicated that business confidence deteriorated amid broader caution about the state of the UK economy.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “November’s flash PMI surveys brought disappointing news on the UK economy.

“Economic growth has stalled, job losses have accelerated, and business confidence has deteriorated.

“Some of this malaise has been blamed on paused spending decisions ahead of the Autumn Budget, but there’s a real chance this pause may turn into a downturn.”

He added that there are growing concerns business conditions will remain tough over the coming months.

Service sector firms reported slower growth for the month, with “many” businesses linking this “to heightened client caution” ahead of the Budget on November 26.

However, manufacturing businesses reported an uptick in activity for the month.

Total new business was however lower across industry, with a return to decline after growth in the previous three months.

Economists have also said the data suggests that rumours around higher taxes at the budget have caused many to pull back spending.

Thomas Pugh, chief economist at RSM UK, said: “The sharp drop in the Flash Composite PMI to 50.5 in October suggests that intensifying speculation around upcoming tax rises in the budget is more clearly feeding through into sentiment.

“Indeed, combining the drop in the PMI, the decline in consumer confidence and the sharp fall in retail sales in October paints a clear picture of nervous consumers and businesses reining in activity.”

Earlier on Friday, separate data from the Office for National Statistics that retail sales unexpectedly fell in October for the first time since May due to growing consumer caution.