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Britain’s economy is shrinking at a record pace, faster than during the 2008-09 financial crisis, as businesses across the services sector shut up shop in face of the coronavirus, a survey showed on Tuesday.

Conducted last week before the government ordered the closure of all pubs, restaurants and other businesses open to the public late on Friday, the monthly Purchasing Managers’ Index points to the economy shrinking at a quarterly rate of 1.5-2.0 per cent.

“This decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter,” said Chris Williamson, chief business economist at IHS Markit, which runs the survey.

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At the worst point of the 2008-09 recession, Britain’s economy shrank 2.1 per cent in a single quarter.

The flash composite PMI – which includes about 85 per cent of firms in the full survey – sank to 37.1 from 53.0, its lowest since the survey started in January 1998 and below all forecasts in a Reuters poll of economists. The services component sank to 35.7 from 53.2, also a record low.

“Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and health care. Demand elsewhere has collapsed … as increasing numbers of households and businesses at home and abroad close their doors.”

The manufacturing activity PMI fell by less, to 48.0 from 51.7. IHS Markit said this reflected an upward distortion, due to the positive impact on the index of lengthening delays from suppliers – usually a sign of a sharp rise in demand, but in this case caused by the coronavirus.

Looking at the manufacturing PMI’s output component alone, production was falling at its fastest since July 2012, during the euro zone debt crisis.

British finance minister Rishi Sunak last week promised businesses $380 billion in loan guarantees and offered to pay 80 per cent of their wage bills if they put staff on leave rather than sack them.

The PMI data showed employment was already falling at the fastest rate since July 2009.

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The Bank of England, in turn, has said it will buy a record 200 billion pounds of extra assets, mostly government debt, and cut its main interest rate to a record-low 0.1 per cent.

Former Bank of England Governor Mervyn King said the economic challenge facing Britain was tougher than during the 2008-09 financial crisis and that public borrowing was likely to rise significantly.

But he warned against viewing the coming economic downturn like a conventional recession or depression.

“In order to deal with a health crisis, the government is deliberately pressing down on economic activity … and at some point there will be a rebound,” he said.

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