Brexit shrinks the economy at fastest rate since the recession


UK economy slows after shock referendum

The UK economy has slumped at its fastest rate since the financial crisis in the wake of Britain's vote to leave the European Union, a report said.

The closely-watched Markit Flash UK Composite Output Index plummeted to its lowest level since April 2009, falling to 47.7 in July. A reading above 50 indicates growth.

The sharp contraction was triggered by falling output and orders for the first time since the end of 2012, while business optimism in Britain's powerhouse services sector hit a seven-and-a-half-year low.

A general view of Fifty, Twenty, Ten, and Five pound notes.

The data, collected between July 12 and 21, provides a stark picture of the state of the economy following the Brexit vote.

Chris Williamson, chief economist at Markit, said the update showed a "dramatic deterioration" in the UK economy, which is on course to contract by 0.4% in the third quarter.

"The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to 'Brexit'."

A general view of the Bank of England in London.

He added: "At this level, the survey is signalling a 0.4% contraction of the economy in the third quarter, though much of course depends on whether we see a further deterioration in August or if July represents a shock-induced nadir.

"Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least."

The pound fell in response to the report - it was down 0.2% against the dollar at 1.318 US dollars and down 0.3% against the euro at 1.195 euro.