LONDON (The Guardian) -Liz Truss becomes the UK’s next prime minister with the economy on the brink of recession, according to figures that show private sector activity fell last month as businesses struggle with soaring costs.
The latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply (Cips) revealed a “severe and accelerated” decline in manufacturing output in August, alongside weaker activity in the UK’s dominant service sector.
The monthly business survey, which is closely watched by the government and the Bank of England for early warning signs from the economy, found growing worries over soaring inflation and a marked reduction in confidence among firms.
Cost pressures remained extremely elevated, linked to rising prices for energy and fuel as Russia’s war in Ukraine further drives up costs on the wholesale market. Unlike households, businesses do not benefit from an energy price cap.
“The incoming prime minister will be dealing with an economy that is facing a heightened risk of recession,” said Chris Williamson, the chief business economist at S&P Global Market Intelligence, with the British economy facing a “deteriorating labor market and persistent elevated price pressures linked to the soaring cost of energy”.
Economists said challenges including sky-high inflation, Brexit and severe staff shortages were weighing on growth. With households facing the biggest hit to their living standards since the 1950s, the S&P and Cips snapshot reflected collapsing demand for consumer-facing services such as restaurants, hotels, travel and recreational activities.