Elections slow growth, but Britain still beats its rivals

British economic growth has slowed this month as companies wait to make big decisions until after the election, a closely watched business survey has found.

But despite activity falling to its lowest level in seven months, UK private sector output was higher than that of European rivals.

According to the S&P Global survey, the UK score fell from 53 in May to 51.7 last month. A reading above 50 indicates growth.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘Flash PMI survey data for June points to a slowdown in the pace of economic growth, indicating GDP is now growing at a sluggish quarterly pace of just over 0.1 per cent.

‘The slowdown partly reflects uncertainty about the business environment in the run-up to the general election, with many companies seeking a pause in decision-making while awaiting clarity on various policy measures.’ It comes after the UK economy recovered early this year following a recession in late 2023.

Take it easy: The latest PMI reading showed a slowdown in June, led by a decline in the services sector from 52.9 to 51.2

The economy grew at a gangbusters pace of 0.6 percent in the first quarter of 2024.

And the Bank of England this week raised its outlook for the second quarter from 0.2 percent to 0.5 percent. The outlook has improved due to a drop in inflation to 2 percent and the likelihood of an upcoming interest rate cut.

However, yesterday’s PMI reading showed a slowdown in June, led by a decline in the services sector from 52.9 to 51.2.

The figure for the smaller manufacturing sector rose to a two-year high of 51.4. Analysts said they expected a recovery next month.

Rob Wood, chief Britain economist at Pantheon Macroeconomics, said: “The fall in the PMI is an election-related issue, the UK is doing well.”

Across the eurozone, the PMI fell to a three-month low of 50.8 in June, down from 52.5 in May.

That reflected a sharp decline in German manufacturing activity and a slowdown in France, where output fell for the second month in a row to 48.2. German economic activity slowed to 50.6.

ING’s Bert Colijn said the PMI reading for the eurozone was a “reality check”, showing the bloc’s economic recovery is “not a Cinderella story”.

“With euro risk returning around the French elections and higher interest rates still filtering into the economy, this is no time to be complacent,” he said.

‘The eurozone economy is performing better than in 2023, but headwinds remain.’