Britain’s economy appears to be losing steam, with major business surveys showing a marked slowdown in the services sector and boardrooms beset by doubt about the future following the country’s vote to leave the European Union.
While the economy has fared better than most economists expected since June’s Brexit vote – largely thanks to upbeat consumers – Monday’s surveys will heighten concerns about its longer-term prospects. Key measures of business investment and turnover confidence hit four-year lows in the third quarter, the British Chambers of Commerce (BCC) said in its Quarterly Economic Survey of 7,000 businesses – the largest of its kind.
Separately, chief financial officers (CFOs) in major British firms reported only a partial rebound in business morale after a post-Brexit vote nosedive, accountants Deloitte reported. Investors have become increasingly concerned that Britain will lose many of the preferential trading terms it has with the EU – a so-called “hard Brexit” – pushing sterling to a fresh 31-year low against the dollar last week.
The Confederation of British Industry and other groups called on Saturday for the government to rule out the “really worst” trade options, to unblock investment held up by fears that the government will prioritize other goals in Brexit talks. While the BCC survey offered some signs the weak pound has boosted manufacturing exports, it also pointed to a noticeable slowdown among services companies that form the backbone of Britain’s private sector economy.
Investors have become increasingly doubtful that the Bank of England will cut interest rates again this year, given robust consumer spending and sterling’s renewed plunge. The BCC said its latest survey – which was conducted between Aug. 22 and Sept. 12 – is in line with its forecast that economic growth in 2017 will amount to just 1 percent, half its average rate since the 2008-09 recession.