By Andy Bruce
LONDON, Jan 22 (Reuters) - Britain's relapse into a third national COVID-19 lockdown has sparked the sharpest drop in business activity since May, with services companies hit hardest, a survey showed on Friday.
A preliminary "flash" IHS Markit/CIPS UK Composite Purchasing Managers' Index (PMI) fell to 40.6 in January, down from 50.4 in December.
The drop below the 50 threshold for growth was bigger than any economist forecast in a Reuters poll, which had pointed to a reading of 45.5.
In addition to the latest lockdown, data company IHS Markit said Britain's post-Brexit shift to a more bureaucratic trading arrangement with the European Union had contributed to the decline.
“Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports," Chris Williamson, chief business economist at IHS Markit, said.
The pace of job losses accelerated, after easing in December.
Economists polled by Reuters last week forecast a 1.4% fall in output for the first quarter.
The official death toll from COVID-19 in the United Kingdom is nearing 100,000 and is currently the highest in Europe and the fifth worst in the world after the United States, Brazil, India and Mexico.
Britain is rolling out vaccines faster than many of its peers, which should bode for a swift economic rebound later this year.
Thursday's survey showed companies were upbeat about their business prospects for the year ahead, with optimism hitting a 6-1/2-year high.
The PMI for the services industry, which accounts for the vast bulk of Britain's private sector economy, fell to 38.8 in January from 49.4 in December, its lowest level since May and marking a third month of contraction.
Factories fared much better, despite fading growth in output and a renewed decline in order books. The manufacturing PMI fell to 52.9 in January from 57.5 in December, remaining above the 50 dividing line for growth. (Editing by Toby Chopra)