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A Weak October for UK Services but the EU Predicts Stability

The British economy suffered another drop in the key services sector in October. The latest figures to be released showed that this was the seventh month of 2019 with declining new orders. 

Particularly noteworthy was the ongoing struggle of the UK’s car industry, which now shows an annual drop of 6.7%.

The Overall Figures

Continuing uncertainty over Brexit has been blamed for the poor level of growth from service firms. Export orders were particularly badly affected last month, with the numbers dropping at the same rate as in September, when the decline reached almost-record levels.    

The IHS Markit/Cips Purchasing Managers’ Index (PMI) showed a modest increase of 0.5%, rising from 49.5% in September to 50% in October. Any number above 50 on this index is an indicator of growth. Numbers below 50 represent a contracting economy.

Despite this small increase, the UK is currently going through its poorest spell since the financial crisis in 2008. As for the struggling car industry, new car sales fell heavily when compared to October of 2018. From over 153,000 a year ago, sales dropped by 6.7%, to 143,251. 

Over the first 10 months of the year, sales of new cars are now 2.9% lower than for the same period in 2018. Industry experts believe that consumers are avoiding making big purchases like new vehicles due to the current economic climate. 

The EU Deliver a More Optimistic Prediction

The European Commission recently released its Autumn 2019 Economic Outlook. This document gives a more positive picture of the future of the British economy. The report from Brussels suggests that the UK will perform better than Germany after Brexit.

They say that the country’s GDP should remain stable this year, as well as in 2020 and 2021 too. In addition, the report mentions that the British economy looks to remain “resilient but modest” with growth expected to continue at a “broadly stable pace” for the next few years covered in their predictions.  

On the other hand, they pointed out the growth in business investment has been “weak” lately. They put this down to the current uncertainty that hangs over the UK’s future trading relationship with members of the EU. This is also one of the factors leading to the current focus many businesses have on international debt collection.

They also confirmed that the predicted growth in the UK’s GDP has been increased by 0.1% since their last predictions in the summer of 2019. It has now been raised to 1.3% for 2019, followed by 1.4% in 2020 and the same again the following year.  

The comparison with Germany is due to the fact that their economy is expected to stagnate in the next few years. For 2019, the GDP is forecast at just 0.4%, with this figure rising only slightly to 1% in 2020 and 2021.

The EU’s forecasts for Germany had previously shown 1.4% growth for next year before this revision. This new report stated that the country went into a technical recession during 2019, but that “muted growth” is now expected in the next three years.