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London - UK companies are feeling the strain from the upcoming European Union referendum, with a gauge of services falling to its lowest level in more than three years in April.
Markit Economics said its services Purchasing Managers Index dropped to 52.3 from 53.7. While that’s above the 50 level that divides expansion from contraction, it’s the weakest since February 2013 and below the 53.5 median forecast of economists.
The slump follows bigger-than-expected declines in Markit’s manufacturing and construction surveys earlier this week. The reports indicate growth of just 0.1% in April, down from 0.4% in the first quarter.
The pound was trading at $1.4500 as of 10:43, up 0.1% from a day earlier.
The Bank of England (BoE) has already said the buildup to the June 23 vote is weighing on confidence and investment, and warned the impact could be more severe if the UK votes to leave the bloc in a so-called Brexit. Markit’s composite PMI fell to the lowest in more than three years last month.
Holding back
“Uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand,” said Chris Williamson, chief economist at Markit in London. “The deterioration in April pushes the surveys into territory which has in the past seen the BOE start to worry about the need to revive growth.”
BOE officials have said they will interpret economic data around the referendum will caution. They will announce their next interest-rate decision and publish new forecasts on May 12.
Some services companies said clients delayed new contracts because of the forthcoming referendum, according to Markit. Employment growth slowed in April and the outlook for activity was at its joint-weakest level in over three years, it said.
