Business confidence falls amid warnings Brexit uncertainty is holding back investment
Business confidence fell significantly in August as firms batten down the hatches for a bumpy year, according to a closely followed survey of British companies.
The balance of firms expecting stronger trading prospects in the coming year fell by five points to 29 per cent, according to the Lloyds Bank survey of more than 1,000 firms compiled by BDRC Continental. Businesses' judgements on Brexit's future impacts fell to their lowest since December.
Firms in the UK’s dominant services industry, which accounts for four-fifths of British output, were the least optimistic about the coming year, with Brexit concerns highest in the wholesale, hospitality and leisure and public sectors.
Separate data from polling firm GfK, also to be published today, will show a slight uptick in confidence among consumers. However, confidence overall remains negative, well below the positive levels seen before the EU referendum in 2016.
The lack of a concrete trade agreement between the UK and the EU, less than seven months from Brexit on 29 March 2019, has raised fears among firms with cross-border trade of a “cliff-edge” departure without a deal. Business groups are united in warning that a collapse in talks, leading to trade under World Trade Organisation terms, would prove harmful to the British economy next year.
The uncertainty is holding back investment, a key driver of future economic prosperity, according to Sharon Geoghegan, a Lloyds managing director for small business banking.
“Economic uncertainty is definitely driving firms to think twice before investing in their businesses,” she said, “although the manufacturing sector seems to be the most resilient, compared to the services sector which seems to be less confident.”
Confidence among London firms fell even more sharply, by 10 percentage points. Firms in the capital have reined back their hiring plans, with a balance of only 25 per cent expecting to add staff in the next year, down from 59 per cent in July.