The UK's economy just posted a massive red flag as manufacturing posted its lowest PMI reading in seven years.

August's figure for PMI hit 47.4, the lowest figure since July 2012. IHS Markit said that "the high levels of economic and political uncertainty pervasive across domestic and global markets continued to weigh heavily on the performance of UK manufacturing during August."

Orders for British products also contracted at the fastest pace in over seven years according to IHS Markit, signaling the weight political uncertainty and Brexit is having on the economy.

The pound fell 0.7% against the dollar on Monday morning, and 0.3% against the euro.

UK PMI
UK PMI
IHS Markit

"Although traders have trimmed their net short positions a tad last week, there's already a lot of negativity around the pound and the fear is that the economy starts to contract before we leave the EU," said Neil Wilson, chief market analyst at Markets.com.

"The manufacturing PMI data is simply shocking," said Wilson adding "confidence is on the floor, with manufacturers as pessimistic as they have ever been."

The past week has been one of the most tumultuous weeks for Brexit after the UK Prime Minister, Boris Johnson, made the decision to suspend Parliament for a month starting next week a move that would help him push through a "no-deal" Brexit come an October deadline.

Johnson's actions sent the pound tumbling. The pound fell 0.7% against the dollar and 0.6% against the euro last Wednesday as markets feared that Britain would leave the EU without a deal.

But Wilson said this time, the global slowdown taking much of the blame.

"The data for the UK economy may well now get worse before it gets better," said Wilson.

This week the UK parliament will sit for one week to discuss Brexit, and anxious traders are waiting to gauge sentiment.

GBP/USD
GBP/USD
Markets Insider

See More: A 'no-deal' Brexit would hammer the Irish economy and wipe billions from its GDP.

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