The latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply (Cips) revealed a “severe and accelerating” fall in manufacturing output in August, alongside weaker activity in the UK’s dominant services sector. The monthly business survey, which is closely watched by the government and the Bank of England for early warning signs from the economy, found growing concerns about soaring inflation and a significant drop in confidence among businesses. Cost pressures remained extremely high, linked to rising energy and fuel prices as Russia’s war in Ukraine further increases costs in the wholesale market. Unlike households, businesses do not benefit from an energy price cap. “The incoming prime minister will face an economy facing an increased risk of recession,” said Chris Williamson, chief economist at S&P Global Market Intelligence, with the UK economy facing “a worsening labor market and persistent increased price pressures linked to rising costs energy’s”. The monthly S&P/Cips PMI fell to 49.6 in August from 52.1 in July. Any reading above 50 indicates an increase in private sector activity. ‘Delivery, delivery, delivery’: Truss changes and thanks Johnson in acceptance speech – video The figures come as some economists suggested the UK economy slipped into recession this summer as households tightened their belts amid the cost of living crisis. The Bank of England has predicted that inflation will peak above 13%, the highest level since the early 1980s, and predicts a long recession starting in the last quarter of the year. Economists at Goldman Sachs said last week that inflation could peak above 22 percent, close to the postwar record set in 1975, if current high wholesale energy prices persist into the new year. In her acceptance speech following Rishi Sunak’s victory in the Conservative leadership race, Truss pledged to “deliver a bold plan to cut taxes and grow the economy” and also “tackle people’s energy bills” ahead of a tough winter for households and businesses. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Economists said challenges such as high inflation, Brexit and severe staff shortages were weighing on growth. With households facing the biggest blow to their living standards since the 1950s, the S&P and Cips snapshot reflected a collapse in demand for consumer-facing services such as restaurants, hotels, travel and leisure activities. John Glenn, chief economist at Cips, said: “With port disruption, Brexit red tape and shortages continuing to play a role in driving up inflation, the sector is relatively weak in the face of ever-increasing energy bills. “Services businesses will have their eyes firmly on the new prime minister this week as they hope for a policy-led solution to skyrocketing costs.”
