The UK economy is “grinding to a halt” as a tightening cost of living squeeze sends a chill through private sector activity, reveals a closely watched survey.
Households are cutting spending in response to rampant inflation eroding their budgets, weighing heavily on the UK’s services sector, the country’s economic engine.
Activity among services firms dropped to a 15-month low of 51.8 in May, below the City’s expectations and down sharply from April’s strong reading of 58.9 April, according to S&P Global’s latest purchasing managers’ index (PMI).
That drove overall activity in the UK’s private sector economy also to a 15-month low, according to the PMI.
There is growing concern Britain is hurtling toward a recession due to living costs accelerating much quicker than forecast at the start of the year.
The survey indicates the “economy [is] almost grinding to a halt as inflationary pressure rises to unprecedented levels,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.
Inflation is forecast to climb above 10 per cent after the summer, sparked by the energy watchdog raising the cap on bills again to account for higher wholesale oil and gas prices caused by Russia’s invasion of Ukraine.