Thursday 19 January 2017

UK business confidence sinks over Brexit vote

Lucy Meakin and Scott Hamilton

Published 08/07/2016 | 02:30

A protester at a ‘March for Europe’ demonstration against Britain’s
decision to leave the European Union in London at the weekend. Photo: PA
A protester at a ‘March for Europe’ demonstration against Britain’s decision to leave the European Union in London at the weekend. Photo: PA

UK business confidence sank to a four-and-a-half year low in the days after Britons voted to leave the European Union, adding to evidence that the decision is blighting growth.

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With investors anxiously awaiting data on the consequences, the gauge compounds signs the referendum has hindered an economy that was already losing momentum.

Even reports covering the period before the vote are showing signs of fragility, with Halifax saying house-price growth cooled in June.

GfK is due to publish a one-off survey later today that will assess consumer attitudes in the immediate aftermath.

Jitters are mounting after more than five asset managers froze withdrawals from real-estate funds and the pound tumbled to a three-decade low. Lloyds' gauge of sentiment slid to 6 in the days following the vote, from 32 in May. While that's the lowest since December 2011, in the midst of the euro-area's sovereign-debt woes, it's still above the lows seen during the global financial crisis. An index of economic optimism plunged to minus 11.

"Current sentiment levels signal a clear weakening of the near-term economic outlook, which the Bank of England has already indicated a readiness to respond to," Lloyds senior economist Hann-Ju Ho wrote in the report.

Still, "one month's results should be interpreted with care and much will depend on how confidence levels evolve".

Separate data yesterday showed UK industrial producers were holding up well before the vote, with the firms on course to post their first positive quarter in almost a year.

Output at factories, utilities and mines fell 0.5pc following an upwardly revised 2.1pc surge in April, the Office for National Statistics said.

Economists in a Bloomberg survey had predicted a 1pc drop.

While the ONS says the Brexit effects won't appear in the official data until mid-August, a growing number of surveys show pessimism is intensifying.

House prices - only just starting to feel the impact of last month's vote - gained 1.2pc in the three months to June, down from 1.5pc in the same period to May, Halifax said, casting doubt on prospects for the rest of the year.

Bank of England governor Mark Carney has warned of a material slowing and signaled interest rates could be cut within months. Central bank officials began meeting on the matter on Wednesday and are due to announce their next policy decision on July 14.

The consequences of Britain's vote are "chaos, uncertainty and a lack of understanding", Eurogroup head Jeroen Dijsselbloem told politicians in The Hague yesterday.

"The UK will be worse off in every thinkable way." (Reuters)

Irish Independent

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