British Private Sector Contracts At Fastest Pace Since 2009 Crisis

(RTTNews) - The U.K. private sector activity contracted at the steepest pace since early 2009, after Britons voted to leave the European Union in a surprise move, a closely watched survey showed Friday.

The flash composite output index fell to an 87-month low of 47.7 in July from 52.4 in June, according to flash survey results from Markit and the Chartered Institute of Procurement & Supply.

A score below 50 indicates contraction. Data was collected between July 12 and 21.

In the June 23rd referendum, 52 percent Britons opted to leave the European Union.

The flash services Purchasing Managers' Index dropped more-than-expected to 47.4, an 88-month low, from 52.3 in the previous month. The expected level was 48.8.

The manufacturing PMI came in at 49.1, down from 52.1 in June, but slightly above the expected score of 48.7. This was the lowest score in 41 months.

"The UK economy has suffered sharp falls in output and new orders following the EU referendum as uncertainty has taken hold," David Noble, Group Chief Executive Officer at the CIPS, said.

The true extent of the impact of this uncertainty still remains to be seen next month, Noble added.

At this level, the survey is signaling a 0.4 percent contraction of the economy in the third quarter, Chris Williamson, chief economist at Markit, said.

IHS Global Insight Economist Howard Archer said the U.K. economy is likely to stagnate in the third quarter and then contract mildly in the fourth, but the purchasing managers' survey suggest third-quarter contraction is a very real danger.

However, Ruth Gregory, an economist at Capital Economics, said the survey confirms that the "Brexit" vote has had a significant short-term impact on the economy.

The economist expects a positive response from policymakers to mean that the ultimate economic damage is rather smaller than some of the more pessimistic pre-referendum projections suggested.

Data today showed that the composite output and the composite new orders posted the steepest drops in the series histories. The decline in the services business expectations index was also the largest on record.

Employment in the service sector fell slightly for the first time since December 2012. Manufacturers also registered job cuts, the seventh reduction in as many months.

UK output prices increased in July, although the pace of increase was only mild and weaker than in the prior month.