UK set to dodge recession but May feels pressure at first G20 summit

British PMI data mirrors strong recovery for manufacturing as services posts record rise for August, bucking expectations of a slowdown following the June referendum.

Britain's prime minister Theresa May visits a joinery factory in London. The UK's services sector recorded a strong surge in August. Neil Hall / Reuters

Activity in Britain’s crucial services sector posted a record jump in August, rebounding strongly from a slump immediately following the country’s vote to exit the EU, a survey showed Monday.

The latest Purchasing Managers’ Index data mirrors a strong recovery for the manufacturing PMI month-on-month, indicating that Britain is likely to avoid a recession following the outcome of the Brexit referendum in June, at least in the short term, according to analysts.

The PMI for the services industry surged to 52.9 points in August, from 47.4 in July, The figure had stood at 52.3 in June ahead of the referendum. A reading under 50 indicates shrinkage to activity.

“A record rise in the services PMI adds to the encouraging news seen in the manufacturing and construction sectors in August to suggest that an imminent recession will be avoided,” said Chris Williamson, the chief business economist at survey compiler IHS Markit.

“Uncertainty has certainly eased considerably, helped by the swift settling-in of a new government and central bank stimulus.

“However, although improving on July’s seven-year low, business confidence is still at one of its lowest levels seen over the past four years,” he added in comments accompanying the data.

The news came as the new UK primie minister wrapped up her first appearance at the G20 summit in China. There Mrs May was pressed by the Japanese, Americans and critics back home over her handling of the United Kingdom’s plans regarding leaving the European Union and by the Chinese over the Hinkley Point nuclear plant.

The Bank of England and analysts still expect Britain’s economy to struggle in the coming months as the government negotiates its exit from the European Union.

The prime minister Theresa May wants to control immigration from the EU while retaining strong trading ties, despite warnings from other nations that single market access is incompatible with limits on the free movement of people.

Britain’s vote in favour of Brexit prompted the resignation of Mrs May’s predecessor David Cameron, who led the campaign to remain in the 28-nation bloc.

Mrs May’s first G20 summit as British prime minister gave her a taste of just how difficult it will be to satisfy voters at home and governments abroad in Brexit negotiations.

While Mrs May closed the meeting in Hangzhou, China, speaking about Britain being a leader on global free trade, Japan’s Shinzo Abe expressed fears the country is closing itself off and demanded she give more certainty to Japanese companies operating in the UK. Barack Obama stood by his warning that a free trade deal with Britain is not a priority. That was all before a meeting with her host, Xi Jinping, under the shadow of her refusal to commit to the Hinkley Point nuclear plant, in which China plans to invest.

Meanwhile back at home, the former UK Independence Party leader Nigel Farage accused the prime minister of “serious backsliding” after she rejected the key promises of the victorious Brexit campaign, including an Australian-style points-based system of controlling immigration. She rejected the charge.

“What the British people voted for on June 23 was to bring some control into the movement of people from the European Union to the UK,” Mrs May said at the close of the summit. “A points-based system does not give you that control.”

She offered no details on any decisions, but hints on several areas. Asked whether the delay on the nuclear plant risks damaging Britain’s dealings with China, she said that “our relationship with China is about more than Hinkley”. And questioned about the idea she might formally trigger Brexit negotiations at the start of 2017, she said she had not set a time.

“There has been no change,” Mrs May said when asked if the UK’s role has been diminished at the G20 by the Brexit vote. “The UK is here and playing our full role as we always have done and will continue to do.”

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