BUSINESS activity crashed at a record pace in March as efforts to contain coronavirus sent the UK economy into a tailspin, preliminary survey data has shown, putting Britain on track for an extreme recession.

The IHS Markit/Cips private sector purchasing managers' index (PMI) — a gauge of economic performance — plunged to a record low of 37.1 in March from 53 in February. A score of under 50 indicates contraction, meaning the private sector shrank at an unprecedented pace this month. However, the data was compiled before Prime Minister Boris Johnson on Monday ordered an effective countrywide lockdown to try to halt the spread of the virus, a measure which will dent the UK economy further.

Chris Williamson, chief business economist at data firm IHS Markit, said the March data was consistent with the economy shrinking at a quarterly rate of between 1.5 and two per cent in the first quarter.

Yet he said the lockdown measures mean "this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter".

"A recession of a scale we have not seen in modern history is looking increasingly likely."

The overall PMI reading was dragged down by the worst performance on record (IHS Markit has been compiling data since the 1990s) for the UK's massive services sector in March.

Measures aimed at halting coronavirus caused consumer demand and shop footfall to slump, causing steep downturns for hotels and restaurants and other leisure activities such as sports centres, gyms and hair salons.

The survey data showed that unemployment was falling at its fastest pace since 2009 in March, despite a huge package of measures from the government and Bank of England designed to support businesses. Chancellor Rishi Sunak has promised the government will pump more than £350bn into the economy and step in to pay the wages of workers who would otherwise be laid off.

The coronavirus pandemic also caused the biggest collapse in Eurozone business activity ever recorded in March.

IHS Markit's Eurozone PMI crashed to 31.4 in March from 51.6 in February. The figure, well under the 50 nochange mark, indicates a huge contraction in the economy.

(c) 2020 City A.M., source Newspaper