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Britain’s economy appears to have tipped into recession as firms brace for the risk of a disruptive Brexit in just a few weeks’ time, according to a survey which showed the dominant services sector took an unexpectedly sharp downturn last month.
September’s IHS Markit/CIPS services Purchasing Managers’ Index (PMI) fell by more than any economist predicted in a poll, tumbling to a six-month low of 49.5, below the 50 level that divides growth from contraction.
Combined with even weaker manufacturing and construction surveys earlier in the week, September’s all-sector PMI sank to 48.8 from 49.7, its lowest since the month after the referendum decision to leave the EU in June 2016, and before that 2009.
Sterling edged even lower in early trade this morning as investors waited to receive a formal European Union response to Britain’s latest Brexit offer.
The pound has found little direction in recent days and is back where it was at the start of the week.
Analysts say the market is largely sceptical that the EU will agree to Britain’s latest offer to avoid a no-deal departure from the European Union on Oct. 31.
A European Parliament Brexit group believes the new proposals “do not represent a basis for an agreement”, according to the draft of a statement ahead of release later in the day.
It would be one monumental climbdown by the EU to go from a customs union backstop for either the whole of the UK or Northern Ireland with no time limit to a plan that does not entail a customs union and requires some form of border checks that has a potential rolling four-year time-limit attached.
Should the EU reject Britain’s Brexit proposal, attention will turn to the “Benn bill” that compels the government by Oct. 19 to seek an extension to Brexit until Jan. 31, 2020, if no deal is reached during an EU summit on Oct. 17 and 18.
However, Boris Johnson, again told his Conservative party at their annual conference on Wednesday that Britain would leave the EU on Oct. 31 with or without a deal.
GBP/EUR 1.1218 GBP/USD 1.2300 GBP/AED 4.5108
GBP/AUD 1.8306 GBP/CHF 1.2284 GBP/CAD 1.6402
GBP/NZD 1.9559 EUR/USD 1.0950 GBP/ZAR 18.164