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U.K. Services PMI Shows Risk of Economic Stagnation

- Activity in the U.K. service sector slowed last month, bringing the economy near to stagnation, as heightened uncertainty over Britain’s impending departure from the European Union made companies more risk-averse.

The report follows weaker-than-expected surveys for the manufacturing and construction sector, all of which were affected by the same Brexit-related worries.

Construction activity hit a 10-month low with builders unwilling to begin new projects, while manufacturers were stockpiling at the fastest rate in years to ensure they can keep producing if the U.K. leaves the EU on March 29 without transitional arrangements to safeguard their supply chains.

Research firm IHS Markit said its services purchasing managers’ index fell to 50.1 in January, below forecasts for a reading of 51.1, and below December’s reading of 51.2.

On the index, a reading above 50.0 indicates expansion, below indicates contraction.

“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,” IHS Markit chief economist Chris Williamson said in the report.

“The last three months have seen the economy slip into its weakest growth spell for six years, and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth quarter,” he warned.

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