Businesses less optimistic about economy since Brexit…
As the Bank of England cuts interest rates to an historic low and downgrades the UK’s growth prospects, the latest Business Barometer from top 40 accountants Bishop Fleming reveals a collapse in confidence amongst companies following the vote for Brexit.
The firm’s quarterly survey takes a snapshot of businesses across all sectors and regions to assess how they are expecting their businesses to develop over the next twelve months. The latest survey takes place just as official interest rates are cut to an all-time low, with expectations of further cuts later this year.
Key findings from the survey reveal that two thirds of businesses are now less optimistic about the UK economy post-Brexit, compared to around half before the vote. This rise in discomfort is a blow for recruitment plans, with half of those surveyed freezing strategies to take on any new staff.
According to Matthew Lee, Bishop Fleming’s Managing Partner: “The Bank of England’s interest rate cut reflects the fact that the vote for Brexit has had a very tangible impact on business confidence, which was already falling before the Referendum. Now firms have absolutely no idea whatsoever over the UK’s future relationship with the EU. Recruitment decisions have been particularly hit by economic worries, on top of new uncertainties over the status of EU workers in the UK, the effects of the new Living Wage, and concerns over forthcoming levies on employers for apprenticeships and migrant labour.”
A third of businesses surveyed continue to expect no rise in sales in the next twelve months, reflecting an overall stagnation in growth prospects in a weak economy.
Mr Lee commented: “Consumer demand has been hit hard by Brexit. Certain sectors of industry are struggling and cannot raise volumes or prices to meet rising staff and pension costs. This squeeze on margins will undoubtedly continue for the foreseeable future until the effects of Brexit become clear, with a likely knock on effect on insolvencies.”
Adding to the UK’s economic woes, more than two-fifths of those responding to the survey confirmed a moratorium on any new business investment.
Mr Lee said: “As growth prospects for the economy have been slashed post Brexit, firms are averse to purchasing new equipment or property at the moment, even though borrowing costs are so low.”
The survey revealed a silver lining in the clouds of uncertainty with half the businesses surveyed involved in international trade claiming Sterling’s continued drop against major currencies is a boost for exports.
Mr Lee commented: “A fall in the value of the pound makes UK goods and services more attractive to overseas visitors and investors, which is particularly good news for manufacturing and tourism sectors. However, concerns remain over the slowing economies of China and the Eurozone.”
He added: “Overall the survey reveals we are going through a period of adjustment with the UK economy as we wait to see how the Brexit negotiations proceed. The Bank of England has made clear its direction of travel, but we now urgently need the new Chancellor to ‘reset’ the economy to provide the necessary fiscal stimulus. During the 2008 financial crisis, the then Chancellor reduced VAT to 15% – Philip Hammond should now do something similar to help boost consumer demand.”
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