Brexit worries damp UK business spirits

Domestic orders and increasing demand from overseas has boosted UK manufacturing © Bloomberg

Ministers need to set out a “clear and coherent strategy” to calm the nerves of UK companies after the Brexit vote, according to new surveys.

There is growing evidence that the UK will avoid falling into recession this year. Nonetheless, economic growth appears to have slowed since the referendum and uncertainty about the UK’s future relationship with the EU is causing businesses to scale back investment and hiring plans, according to two reports published on Monday.

The consultancy Deloitte said that the effects of Brexit were the single biggest concern for finance directors in large UK-listed companies in the third quarter. Nearly nine in 10 of 127 CFOs surveyed said the level of uncertainty facing their business was higher than normal.

A broader study from the British Chambers of Commerce painted a similar picture. Manufacturing groups appeared to have benefited from an increase in export demand over the summer as sterling depreciated.

There are also still more companies in the manufacturing and services sectors which expect turnover to increase, rather than decrease, over the next year. But the share of businesses reporting optimism about the future has declined since the Brexit vote.

“The animal spirits of the corporate sector took a battering in the wake of the referendum and, three months on, Brexit continues to loom large for the UK corporate sector,” said Ian Stewart, Deloitte’s chief economist.

Track the topics most important to you all in one place

More tips

Illustration of the "Companies" page, showing an "Added" button next to the page heading

“Although it is important not to take one quarter’s figures in isolation, our survey does show that growth has slowed further since the EU referendum” said Adam Marshall, acting director-general of the BCC.

Both the Deloitte and BCC surveys suggest that companies have scaled back their investment and hiring plans as a result of Brexit.

However, the two surveys gave different impressions about whether capital spending and hiring would grow or shrink overall.

The majority of respondents to the Deloitte survey, who are drawn from large UK-listed companies, said they expected capital spending and hiring to be cut over the next 12 months. In contrast, the BCC survey, which also includes smaller businesses, found that more companies expected to increase, rather than cut, investment and hiring.

David Sproul, Deloitte’s chief executive, remains optimistic about large companies’ prospects: “The evidence we have seen so far in the market is somewhat brighter. In the near term we continue to see our clients making investment decisions.”

Mr Marshall said that the government needed to do more to reassure businesses: “The prime minister has given businesses some clarity on the timetable for Article 50, and on short-term regulatory and legal issues … but [this] needs to be followed up by a firm demonstration that the government has a clear and coherent strategy to defend the UK’s economic and business interests in the negotiations that lie ahead.”

Uncategorized

Leave a Reply