U.K. Services Firms See Customers Pull Orders Before Brexit Vote

Brexit referendum nerves took their toll on U.K. services firms in June as customers postponed or cancelled orders, sending business confidence to a 3 1/2-year low.

A Purchasing Managers’ Index fell to 52.3 from 53.5 in May, matching a 38-month low, Markit Economics said in London on Tuesday. The reading was weaker than the 52.8 forecast in a Bloomberg News survey but above the 50 mark dividing expansion from contraction.

The report adds to evidence that the June 23 referendum was hindering the economy even before the shock vote to leave the European Union. Markit said the combination of its factory, construction and services surveys in the three months through June indicates that growth slowed to 0.2 percent and warned there’s a risk the economy could shrink in the current quarter.

“A further slowing, and possible contraction, looks highly likely in coming months as a result of the uncertainty created by the EU referendum,” Chris Williamson, chief economist at Markit, said in the report. “Hiring has also clearly been hit as firms lack clarity on the economic outlook.”

Services grew at their weakest in more than three years in the latest quarter, and expectations for the year ahead were the worst since December 2012.

With less than two weeks since the referendum, there is little hard data on the economic impact of the outcome. Markit said it conducted its services survey between June 13 and June 28, with 89 percent of the responses submitted before the result was announced on June 24.

Britain’s decision to split from the EU has roiled markets, rattled investors and sparked chaos among Britain’s political parties. Bank of England Governor Mark Carney said last week that the outlook had deteriorated and policy easing may be needed within months.

The BOE is due to publish its bi-annual financial-stability report on Tuesday, with Carney due to hold a press conference at 11 a.m. in London. The central bank will announce its next monetary-policy decision on July 14.

“It’s unlikely that policy makers will wait for more data before unleashing additional monetary stimulus,” Williamson said. “More policy action is therefore likely in the coming weeks.”

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