"July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009."
Markit analysis of 600 manufacturing companies shows that output fell to its lowest rate since April 2009.
Output and new orders both fell for the first time since the end of 2012, while service providers’ optimism about the coming 12 months slumped to a seven-and-a-half year low.
A number of firms linked this to ongoing uncertainty pre- and post-EU referendum.
However, new export business rose for the second straight month and to the greatest extent for almost two years due to the sharp drop in the sterling exchange rate.
The downside of the exchange rate was a steep rise in manufacturers’ input prices, mainly due to higher import costs. The rate of purchase price inflation hit a five-year record, with the extent of the acceleration among the steepest in the survey history.
Manufacturers also reported job cuts, the seventh reduction in as many months, while weaker demand and depletion of backlogs of work in both sectors suggest further job losses may occur in coming months.
Chris Williamson, Chief Economist at Markit, commented: “July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009.
“The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit’.
“The one ray of light was an improvement in manufacturing export growth to the best for two years as the weak pound helped drive overseas sales, though producers also suffered the flip-side of a weak currency as import prices spiked higher.
“At this level, the survey is signalling a 0.4% contraction of the economy in the third quarter, though much of course depends on whether we see a further deterioration in August or if July represents a shock-induced nadir. Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least.
“With policymakers waiting to see hard data on the state of the economy before considering more stimulus, the slump in the PMI will provide a powerful argument for swift action.”
