Businesses across the UK are scaling back investment plans and imposing freezes on recruitment as the uncertainty surrounding the Brexit vote reverberates through the British economy.
The Bank of England’s summary of business conditions, based on reports from regional agents, said “investment intentions had fallen since the EU referendum” and pointed to “broadly flat business investment over the next year”.
In stark contrast to July’s agents’ report, which found employers were bouyant about their prospects, the September report said employers were circumspect about taking on new staff and in many sectors were only hiring “where the business case was strong”.
The report will make sobering read for Philip Hammond as he prepares his autumn statement in November. The chancellor is already under pressure to ease austerity measures and find ways to boost public investment in infrastructure and vital services such as the NHS.
Without an increase in private investment, Hammond will need to deploy more funds from the exchequer to generate a substantial increase in investment, especially in depressed areas outside London and the south-east.
Last week the Bank left base rates unchanged at 0.25%, though it hinted that a deterioration in economic conditions over the next six months could lead to a further rate cut.
Its agents said large-scale private sector projects were “being challenged more rigorously and, in some cases, being scaled back or deferred”.
“Projects already underway were largely continuing, however, and contacts across all sectors were still investing to generate cost efficiencies and increase productivity.
“The slowing in capital spending had been most pronounced among companies providing professional services to the commercial real estate market. In contrast, investment among consumer services firms had remained more resilient,” the report said.
In tune with official surveys, the report found most retailers enjoyed modest growth during the summer months, and consumer services continued to expand.
The cheaper pound helped manufacturers lift exports and gave a boost to services firms operating overseas.
But revenue growth in domestic business services firms slowed over the past three months. “That had mainly reflected heightened uncertainty, which had reduced demand for a range of professional and financial services,” the report said.
“In particular, haulage and distribution companies reported a weakening of turnover growth, as companies sought to keep stock levels low to preserve cash in the face of higher uncertainty. Publishing and broadcasting contacts had seen advertising revenues weaken. Services exports growth had picked up moderately.”
A slowdown in the housing market also caused a ripple of anxiety across most business sectors, the report said, triggering cutbacks in investment and a weaker jobs market.
