This downturn in new business activity is “overwhelmingly linked” to current political uncertainty at the start of 2019, according to IHS Markit and the Chartered Institute of Procurement & Supply CIPS.
The latest UK Services Purchasing Manager’s Index (PMI) Business Activity Index sat at 50.1 for January, down from 51.2 in December and below the UK All Sector Output Index.
The figure is just slightly above the 50.0 “no-change value mark” – the point at which growth in the sector begins to stall.
A number of respondents said client demand had weakened due to Brexit-related concerns, while this had also delayed decision-making on new projects.
“The latest PMI survey results indicate that the UK economy is at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slower slowdown in the global economy,” said Chris Williamson, chief business economist at HIS Markit.
He said that service sector growth almost grinding to a halt in January matched similar results for manufacturing and construction and pointed to the last three months, which has seen the economy “slip into its weakest growth spell for six years”.
The survey found transport and communications and financial intermediation to be the weakest performing areas.
New business volumes were also found to have declined for the first time in two-and-a-half years, and uncertainty was to blame.
Respondents cited political uncertainty as the reason for fewer new orders, as Brexit concerns made clients more cautious and risk-averse in relation to new projects.
“The survey results indicate that companies are becoming increasingly risk averse and eager to reduce overheads in the face of weakened customer demand and rising political uncertainty,” Williamson said.
Although these were most commonly linked to Brexit, he explained, the global politics and economic factors have also been dampening demand.
On Monday, Deloitte’s quarterly CFO survey found that UK CFOs have adopted their most defensive mix of balance street strategies in nine years, with risk appetite falling to its lowest since just after the financial crisis.
While, ICAEW found that UK business confidence has plummeted as the Brexit “roulette wheel continues to spin”.