The UK services sector contracted for the first time in three and a half years thanks to Brexit.
The PMI (Purchasing Managers’ Index) survey data from IHS Markit and CIPS shows that the output and new business both declined and at the fastest rates since early 2009, with the Business Activity Index falling from 47.4 in July, compared with 52.3 in June.
It meant employment in the services sector stayed the same, marking the end of a 3.5-year period of uninterrupted job creation.
The volume of incoming new business dropped for the first time since the end of 2012. The report said that this was the fastest decline since early 2009 and again fuelled by uncertainty over the EU vote.
Chris Williams, chief economist at Markit, said: “It is too early to say if the surveys will remain in such weak territory in the coming months, leaving substantial uncertainty over the extent of any potential downturn. However, the unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.
“Service providers are certainly bracing themselves for worse to come with a record drop in business confidence about the year ahead, leaving optimism at its lowest ebb since February 2009.”
Still at least Brexit means we will no longer having foreigners telling us how to run things, even if they appear to have been doing it better than us.
Amazon says that its British site has not seen any sales dip since the vote to leave the European Union, and in fact it is planning to create a further 1,000 jobs across the UK this year.
UK country manager Doug Gurr said that the site’s sales were in line with expectations and it was business as usual.
Gurr, who became Amazon’s UK head in May after a stint in China, said it was too early to say what the impact of the June 23 Brexit vote would be.
“There’s a lot of details to be worked out … We don’t know exactly what the regulatory environment will be, we don’t know exactly what the terms of the new separation will be,” he said.
A survey published last week showed confidence among British consumers fell sharply in the days after the referendum, while on Tuesday department store retailer John Lewis said its sales grew more slowly last week.
On Tuesday the boss of Sainsbury’s, Britain’s second largest supermarket group, said there was a danger of Britain talking itself into another recession.
Gurr said Amazon’s plans for the UK had not changed on the Brexit vote.
“We’re continuing with the plans, we haven’t suddenly invented new plans,” he said.
The additional jobs will take Amazon’s full time permanent employees in the UK to over 15,500 by the end of the year.
The status of EU nationals currently living in Britain has been clouded by the Brexit vote.
“What we’ve said to all of our teams is: ‘As far as we’re concerned nothing changes. We’re still part of the EU as of today, we’ll continue to operate on that basis,” said Gurr.
UK suppliers are already having to pay the cost for the UK’s Brexit referendum result – Michael Dell is already jacking up his prices by eight percent.
Dell increased UK prices across its portfolio by eight or nine percent, according to its partners. He is not the only one. Canalys warned that US vendors will begin hiking the prices of its products feared the UK IT market could shrink by as much as 15 percent next year.
Dell tends to hedge everything against the dollar on a quarterly basis. It was expected that he would do it in August but it was brought forward.
Fortunately, all the suppliers are in the same boat and no one is going to get an advantage out of this. However, it does makes sales teams look a bit stupid if they quoted a price one morning and are having to jack up the prices a few days later.
The worry is that clients will start looking at their budgets again and wonder about suspending projects until things have settled down a bit.
In a statement, Dell said:
“Dell’s priority is always to provide great value to our customers and partners. We carefully consider price moves for our customers and partners, and have worked diligently over the past several months to postpone any increases pending the outcome of the EU referendum. In line with the rest of the industry, our component costs are priced in US dollars, and unfortunately, the recent strengthening of the US dollar versus the euro and other currencies in the EMEA region, following the UK’s decision to leave the European Union, will have a direct impact on the price we sell to our EMEA customers and partners.
“We understand that this is an uncertain time for many British businesses and we will continue to work closely with our customers and partners to provide great value products and services,” a spokesDell said.
Dixon Carphone attempted to play down the personal impact of market volatility that a post-Brexit vote will “inevitably” cause.
Dixon Carphone CEO Seb James talked bullishly about the business and its prospects but noted that things could get a bit edgy since Friday’s EU referendum.
“The nation has spoken and there has been a vote to exit the EU in due course. As you can imagine, we have been giving some thought to this,” he said.
“Our view is that, as the strongest player in our market and despite the volatility that is the inevitable consequence of such change, we expect to find opportunities for additional growth and further consolidate our position as the leader in the UK market,” said James.
Dixon Carphone said group sales edged up three per cent year-on-year to £9.78bn for the year ended 30 April. Sales in its UK heartland went up one per cent to £6.4bn, reflecting stores closure.
Demand for white box goods offset weaker trade in computing, TV sales benefited from the Rugby World Cup last year it said. The mobile element saw market share gains helped by the store within a store concept, the launch of a 4G network branded iD and lasting benefits of Phones4You going pop in the prior financial year, the company said.
Connected World Services jumped to £152m from £121m. Dixon has a deal to roll out CWS in Sprint stores across the pond.
Profit for the year was £337m, up from £285m in the prior financial year.
The UK’s tech channel is in a panic this morning as its managers try to get their head around Friday’s Brexit decision.
Gartner has forecast that Britain’s tech buyers will now stop spending in 2016 and 2017, turning earlier growth numbers negative and the industry will fall into recession. There is also a fear of the cost of hiring EU workers, taxes and tariffs which is enough to send the industry into a tail spin.
Still at least we won’t have those nasty foreigners telling us what to do, we can just sit around muttering there will always be an England as the French start turning off the power.
Most of the tech companies have said that they needed Brexit like a hole in the head and are wondering how they can recover their position. Basically the issue is that global business value chains are more integrated, while Brexit envisages a market which was out of date 40 years ago with Britannia ruling the waves.
SAP has said that things might be alright if the country pulls finger quick and makes its escape as fast as possible.
However, outfits like Alfresco Software moan about the huge uncertainties which gets more than half its business from the EU.
Now that the UK has voted for Brexit the government is almost certain to water down the EU’s proposed tough data regulations to allow US companies to snoop on UK citizens.
The EU alarmed the US tech companies by drawing up rules, which would insist that European data stay in Europe. The US government wanted its companies operating in Europe to be able to hand over data with a court order. Essentially this meant that any Euro cloud data could end up in the hands of Uncle Sam.
While the Germans and French thing this is a bad idea, the British are less keen. Not only are they closer to the US intelligence communities, but they are also chummier with big US tech.
The General Data Protection Regulation (GDPR) was due to come into place by 2018 and have been should be a huge shake-up of EU data protection laws. It included tougher penalties for companies in breach of EU data protection law. The UK government had wanted to water down the legislation, but it was not sure if it could get the EU to agree.
With Brexit that has all gone by the wayside. With the UK is out, the government can ignore bringing the laws in completely and can push ahead with its own data sharing plans. These could give data to whoever it likes and spy on whoever it wants. From a supplier perspective it means it will be easier to house data in the UK, but UK customers might have to be happy to have their data snuffled by US spooks.
Suppliers could also be forced to hand over data to US courts, if the UK really does need to suck up to the US government.
Microsoft’s UK boss has sent a letter to staff outlining why the firm believes the country is better off remaining in the EU.
This is expected as the IT community generally has backed the campaign to remain in the EU and even put their names to a letter published in a national newspaper.
But Michel Van der Bel, UK CEO of Microsoft did not join the throng, making many wonder if Vole really did hate Europe. Now he has nailed his colours to the mast and penned a letter to the little Voles who work for him outlining his views and the reasoning behind it to make the case against Brexit.
Van der Bel stated that the vote was very much a question for individuals but, “as a business that is very committed to this country, our view is that the UK should remain in the EU”.
“We have a long history here. It’s where we opened our first international office in 1982 and we have been investing in the UK ever since. We have more that 5,000 highly qualified people working in fields including support, marketing, gaming, communications, cybersecurity and computer science research,” he added.
“Historically, the UK being part of the EU has been one of several important criteria that make it one of the most attractive places in Europe for the range of investments we have made. At key moments in our international growth we have specifically chosen to invest in our capabilities here in the UK,” stated the letter.
Microsoft recently invested in data centres in the UK to service the European market. This will be dicey if the Britain leaves the EU.