The mere possibility of a British exit from the European Union appears to be taking its toll on the U.K. economy, with one index showing a “near-stalling of economic growth” in April. The actual referendum, often referred to as Brexit, is set for June 23.
The country’s economic growth slowed significantly last month. Its combined output index, measuring manufacturing, construction and services, fell to 51.9 in April from 53.6 in March, and economic growth was just 0.1 percent in April, according to PMI surveys conducted by Markit Economics, a global financial services information company based in London.
The three surveys, which Markit conducted jointly with CIPS, the Chartered Institute of Procurement and Supply, “collectively indicated the weakest rate of expansion since March 2013, with growth slowing across the board,” wrote Markit’s chief economist Chris Williamson in a post reporting findings.
“Business confidence has ... deteriorated in recent months,” Williamson wrote, adding that several companies in April said uncertainty over whether the U.K. would leave the European Union had “caused customers to hold back on purchases,” further weakening demand amid government spending cuts and concerns over global growth.
— Markit Economics (@MarkitEconomics) May 5, 2016
Growth has nearly stagnated in manufacturing and construction in the U.K. Only the services sector has recorded significant growth, Markit reported, even though its rate of growth has slowed since January.
The U.K.’s manufacturing PMI fell below the critical mark of 50, reaching 49.2 in April. A reading below 50 denotes contraction in the index.
“Manufacturers are emphasizing slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil and gas industry, retail sector and the EU referendum,” Rob Dobson, a senior economist at Markit, explained in a comment. “With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry.”
How the U.K. government will respond to economic jitters over a potential Brexit remains to be seen. Mark Carney, governor of the Bank of England and chairman of the Monetary Policy Committee, told reporters in February, “There’s a very long list of things around the EU referendum about which we don’t want to say anything.”
The committee had “contingency plans around potential market events, potential shocks,” including the EU referendum, Carney added, but “it serves no one to talk at length about the specifics of those contingency plans in advance.”
The monetary policy committee is scheduled to announce its next decision on interest rates May 12.