The Bank of England’s latest summary of business conditions has reported that there has been no clear tangible meltdown following the decision to leave the EU. However, with that said, “Following the EU referendum, business uncertainty had risen markedly. Many firms had only just begun to formulate new business strategies in response to the vote and, for the time being, were seeking to maintain ‘business as usual’. A majority of firms spoken with did not expect a near-term impact from the result on their investment or staff hiring plans. But around a third of contacts thought there would be some negative impact on those plans over the next twelve months.”
The survey appeared on the same day as UK jobs numbers show unemployment falling to 1.65 million, down by 54,000 from the previous period, with the unemployment rate now at 4.9%. Wage growth has risen slightly – with average earnings, including bonuses, up by 2.3%, a slightly raised rate of growth compared to the previous period. Despite some recent news of SME difficulties post-Brexit, it would appear that concrete losses have yet to materialise.
According the survey, the biggest challenge facing the UK economy is uncertainty. “Many contacts planned to undertake strategic reviews of their operations over the coming months in light of the vote,” the survey, a monthly review of what businesses in the UK are doing, as well as their plans and expectations for the future, said. “For many, the result of the referendum was a shock; few had contingency plans and so for the time being were in a mode of seeking to maintain ‘business as usual’.
Uncertain climate in the longer term
The investment climate is described as ‘uncertain’, and the survey shows the majority of firms spoken with, “Did not expect a near-term impact from the referendum result on their capital spending. But around one third expected some negative effects over the next twelve months, with reports of a ‘risk off’ approach to expenditures and some imminent plans for spending slipping.”
The bright spot, at least in the short term, centres on the prospects for exports. “The referendum result was expected to have a positive effect on export turnover over the coming year, particularly for manufacturers, as the depreciation of sterling boosted export earnings.”
The FSB welcomed the encouraging jobs figures, but agreed that uncertainty will take its toll while it lasts. FSB National Chairman Mike Cherry said:
“The unemployment rate is at historically low levels, but this does not seem to be translating into broader business confidence. Clearly there are other factors at play which, although not hitting jobs now, are causing business owners to take a cautious approach.
“Small businesses are already dealing with considerable new cost challenges, including the National Living Wage and pensions auto-enrolment deadlines. With the result of the EU referendum bringing even greater uncertainty about the future – small business will need reassurances from Government that it will support them and listen to their needs throughout the coming negotiations.”