Brexit uncertainty is 'starting to bite' for UK firms

  • Economy
  • Monday, 08 Oct 2018

British Prime Minister Theresa May will announce changes to her ministerial cabinet on Monday. - Reuters

LONDON: Britain's businesses are suffering from Brexit-related uncertainty as exports slow, recruitment difficulties mount and investment plans are scaled back, two surveys showed on Monday.

The British Chambers of Commerce said its survey of 5,600 companies, the largest of its kind in Britain, showed services firms were having the most trouble finding staff since the survey began in 1989, and growth in factory exports was the slowest since late 2016.

"These figures reinforce what we are hearing from businesses up and down the country -- the uncertainty over Brexit, and the lack of bold moves to boost business at home, are starting to bite," BCC director general Adam Marshall said.

Last week Prime Minister Theresa May told her Conservative Party to back her plan to leave the European Union as Britain entered "the toughest part of the negotiations".

Diplomatic sources told Reuters on Friday the EU's Brexit negotiators see a divorce deal as "very close".

Britain's economy has lagged behind the growth rate of many other rich countries for much of the period since the 2016 Brexit vote.

The BCC's quarterly survey showed that the percentage of services businesses looking to recruit more staff over the next three months fell to 47 percent from 60 percent, the lowest since the first quarter of 1993. Seventy-two percent of firms reported recruitment difficulties, the highest on record.

For manufacturers, growth in both export sales and new export orders was the slowest since the end of 2016.

"Weaker sterling is no longer providing a boon to many of our exporters, while consumer spending is failing to boost the domestic market," Marshall said.

Separately on Monday, accountancy firm Deloitte said its survey of chief financial officers pointed to slower business spending and hiring after Brexit.

Only 13 percent of CFOs were more optimistic about the prospects for their company than they were three months ago, down from 24 percent in July, Deloitte said.

Seventy-nine percent said they expected the long-term business environment to be worse as a result of leaving the EU, the highest share since the 2016 Brexit vote.

David Sproul, chief executive of Deloitte North West Europe, said confidence could recover if Britain secured a Brexit deal.

"A deal with a sensible transition period would remove the uncertainty and should deliver a real boost to business spirits," he said.

Economists polled by Reuters expect official data due on Wednesday to show solid economic growth of 0.6 percent for the three months to August, though the year-on-year performance is predicted to be less impressive at 1.5 percent.

Much of the growth in the economy this year has been driven by stronger-than-expected spending by consumers, despite a continued squeeze on their spending power by inflation running higher than wage growth.

Last month the BCC predicted growth for 2018 would slow to 1.1 percent, its weakest since the end of the 2008-09 recession. - Reuters
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