Investing.com – Activity in the U.K. service sector fell more than expected in June with the second quarter showing its slowest growth in more than years, underlining concern over the health of the British economy as the sector makes up approximately 80% of gross domestic product, industry data showed on Friday.
In a report, market research group Markit said the seasonally adjusted Markit/CIPS Services purchasing managers’ index (PMI) dropped to 52.3 last month from a reading of 53.5 in May.
Analysts had expected the index to rise to 52.5 in June.
On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.
Worth noting, Markit noted that 89% of the surveys were submitted before the U.K. voted to leave the European Union (EU), known as a Brexit.
“The PMI surveys indicate that the pace of U.K. economic growth slowed to just 0.2% in the second quarter, with a further loss of momentum in June as Brexit anxiety intensified,” Markit chief economist Chris Williamson said.
This expert warned that a further slowing, or even contraction, was “highly likely in the coming months as a result of the uncertainty created by the EU referendum”.
Williamson added that the PMIs were already in territory general associated with the Bank of England cutting interest rates.
“It’s unlikely that policymakers will wait for more data before unleashing additional monetary stimulus,” he said, concluding that more policy action was “likely in the coming weeks”.
In an immediate reaction to the report, the pound moved back towards a 31-year low against the dollar. GBP/USD was trading at 1.3143 from around 1.3170 ahead of the release of the data, while EUR/GBP was at 0.8485 from 0.8469 earlier.
Meanwhile, European stock markets traded lower, with London’s FTSE 100 falling 0.62%. The Euro Stoxx 50 lost 1.67%, France's CAC 40 traded down 1.56%, while Germany's DAX shed 1.57%.